Registration No. 2-76547
File No. 811-3420
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 20 / X /
and/or
REGISTRATION STATEMENT UNDER THE / X /
INVESTMENT COMPANY ACT OF 1940
AMENDMENT N0. 21 / X /
OPPENHEIMER INTEGRITY FUNDS
(Exact Name of Registrant as Specified in Charter)
3410 South Galena Street, Denver, Colorado 80231
(Address of Principal Executive Offices)
1-303-671-3200
(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
Oppenheimer Management Corporation
Two World Trade Center - Suite 3400
New York, New York 10048-0203
(Names and Addresses of Agent for Service)
It is proposed that this filing will become effective
/ / Immediately upon filing pursuant to
paragraph (b)
/ X / On May 1, 1994, pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / On ________________, pursuant to paragraph (a) of
Rule 485
The Registrant has registered an indefinate number or amount of its
shares under the Securities Act of 1933 pursuant to Rule 24f-2 promulgated
under the Investment Company Act of 1940. A Rule 24f-2 Notice for the
Registrant's fiscal year ended December 31, 1993, was filed on February
28, 1994.
<PAGE>
FORM N-1A
OPPENHEIMER INTEGRITY FUNDS
Cross Reference Sheet
Prospectus for Oppenheimer Investment Grade Bond Fund
Part A of
Form N-1A
Item No. Prospectus Heading
- --------- ------------------
1 Cover Page
2 Expenses
3 Financial Highlights; Performance of the Fund
4 Cover Page; Investment Objective and Policies
5 Expenses; How the Fund is Managed; Back Cover
5A Performance of the Fund
6 Dividends, Capital Gains and Taxes
7 How to Exchange Shares; Special Investor Services,
Service Plan for Class A Shares; Distribution and
Service Plan for Class B Shares; How to Buy Shares;
How to Sell Shares
8 How to Sell Shares; How to Exchange Shares; Special
Investor Services
9 *
Prospectus for Oppenheimer Value Stock Fund
Part A of
Form N-1A
Item No. Prospectus Heading
- --------- ------------------
1 Cover Page
2 Expenses
3 Financial Highlights; Performance of the Fund
4 Cover Page; Investment Objective and Policies
5 Expenses; How the Fund is Managed; Back Cover
5A Performance of the Fund
6 Dividends, Capital Gains and Taxes
7 How to Exchange Shares; Special Investor Services,
Service Plan for Class A Shares; Distribution and
Service Plan for Class B Shares; How to Buy Shares;
How to Sell Shares
8 How to Sell Shares; How to Exchange Shares; Special
Investor Services
9 *
__________________
* Not applicable or negative answer.
<PAGE>
FORM N-1A
OPPENHEIMER INTEGRITY FUNDS
Cross Reference Sheet
Statement of Additional Information for
Oppenheimer Investment Grade Bond Fund
Part B of
Form N-1A
Item No. Statement of Additional Information Heading
- --------- -------------------------------------------
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Other Investment
Restrictions;
Appendix A (Prospectus) - Description of Ratings
14 Trustees and Officers of the Fund; How the Fund is Managed
15 Trustees and Officers of the Fund - Major Shareholders;
How the Fund is Managed
16 How the Fund is Managed; Distribution and Service Plans;
Additional Information about the Fund
17 Brokerage Policies of the Fund
18 Additional Information about the Fund
19 About Your Account; Automatic Withdrawal Plan Provisions
20 Dividends, Capital Gains and Taxes
21 Distribution and Service Plans; Additional Information about
the Fund
22 Dividends, Capital Gains and Taxes
23 Financial Statements
Statement of Additional Information for Oppenheimer Value Stock Fund
Part B of
Form N-1A
Item No. Statement of Additional Information Heading
- --------- -------------------------------------------
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Other Investment
Restrictions;
14 Trustees and Officers of the Fund; How the Fund is Managed
15 Trustees and Officers of the Fund - Major Shareholders;
How the Fund is Managed
16 How the Fund is Managed; Distribution and Service Plans;
Additional Information about the Fund
17 Brokerage Policies of the Fund
18 Additional Information about the Fund
19 About Your Account; Automatic Withdrawal Plan Provisions
20 Dividends, Capital Gains and Taxes
21 Distribution and Service Plans; Additional Information about
the Fund
22 Dividends, Capital Gains and Taxes
23 Financial Statements
__________________
* Not applicable or negative answer.
<PAGE>
Oppenheimer
Investment Grade Bond Fund
Prospectus dated 5/1/94.
Oppenheimer Investment Grade Bond Fund (the "Fund") is a mutual fund
with the investment objective of seeking to achieve a high level of
current income consistent with prudent investment risk and the stability
of capital primarily through investment in a diversified portfolio of
investment grade fixed-income securities. You should carefully review the
risks associated with an investment in the Fund. Please refer to "Special
Risks" on page __.
The Fund offers two classes of shares: (1) Class A shares, which are
sold at a public offering price that includes a front-end sales charge,
and (2) Class B shares, which are sold without a front-end sales charge,
although you may pay a sales charge when you redeem your shares, depending
on how long you own them. Class B shares are also subject to an annual
"asset-based sales charge." Each class of shares bears different
expenses. In deciding which class of shares to buy, you should consider
how much you plan to purchase, how long you plan to keep your shares, and
other factors discussed in "How to Buy Shares" starting on page ____.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and keep it
for future reference. You can find more detailed information about the
Fund in the May 1, 1994, Statement of Additional Information. For a free
copy, call Oppenheimer Shareholder Services, the Fund's Transfer Agent,
at 1-800-525-7048, or write to the Transfer Agent at the address on the
back cover. The Statement of Additional Information has been filed with
the Securities and Exchange Commission and is incorporated into this
Prospectus by reference (which means that it is legally part of this
Prospectus).
Shares of the Fund are not deposits or obligations of any bank, are
not guaranteed by any bank, are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of
principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Contents
ABOUT THE FUND
Expenses
Financial Highlights
Investment Objective and Policies
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange
Plans
Reinvestment Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
Checkwriting
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Appendix: Description of Ratings Categories
<PAGE>
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other services, and
those expenses are reflected in the Fund's net asset value per share. As
a shareholder, you pay those expenses indirectly. Shareholders pay other
expenses directly, such as sales charges. The following tables are
provided to help you understand your direct expenses of investing in the
Fund and your share of the Fund's operating expenses that you might expect
to bear indirectly. The calculations are based on the Fund's expenses
during its fiscal year ended December 31, 1993.
- Shareholder Transaction Expenses are charges you pay when you buy
or sell shares of the Fund. Please refer to pages 14 through 23 for an
explanation of how and when these charges apply.
Class A Shares Class B Shares
-------------- --------------
Maximum Sales Charge on Purchases
(as a % of offering price) 4.75% None
Sales Charge on Reinvested Dividends None None
Deferred Sales Charge
(as a % of the lower of the original
purchase price or redemption proceeds) None(1) 5% in the
irst year,
declining to
1% in the
sixth year
and
eliminated
thereafter
Exchange Fee $5.00 $5.00**
(1) If you invest more than $1 million in Class A shares, you may have
to pay a sales charge of up to 1% if you sell your shares within 18
calendar months from the end of the calendar month during which you
purchased those shares. See "How to Buy Shares - Class A Shares," below.
- Annual Fund Operating Expenses are paid out of the Fund's assets
and represent the Fund's expenses in operating its business. For example,
the Fund pays management fees to its investment adviser, Oppenheimer
Management Corporation (the "Manager") and other regular expenses for
services, such as transfer agent fees, custodial fees paid to the bank
that holds its portfolio securities, audit fees and legal and other
expenses. The following numbers are projections of the Fund's business
expenses based on the Fund's expenses in its last fiscal year. These
amounts are shown as a percentage of the average net assets of each class
of the Fund's shares for that year. The "12b-1 Distribution Plan Fees"
for Class A shares are the Service Plan Fees (which are a maximum of 0.25%
of average annual net assets of that class), and for Class B shares, are
the Service Plan Fees (maximum of 0.25%) and the asset-based sales charge
of 0.75%. The actual expense numbers for each class of shares in future
years may be more or less, depending on a number of factors, including the
actual amount of the assets represented by each class of shares. Class
B shares were not publicly sold before May 1, 1993. Therefore, the Annual
Fund Operating Expenses shown for Class B shares are based on expenses for
the period from May 1, 1993 through December 31, 1993.
Class A Shares Class B Shares
-------------- --------------
Management Fees 0.50% 0.50%
12b-1 Distribution Plan Fees 0.25% 1.00%
(includes Shareholder Service Plan Fees)
Other Expenses 0.31% 0.40%
Total Fund Operating Expenses 1.06% 1.90%
- Examples. To try to show the effect of the expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make a $1,000 investment in each class of shares
of the Fund, and that the Fund's annual return is 5%, and that its
operating expenses for each class are the ones shown in the chart above.
If you were to redeem your shares at the end of each period shown below,
your investment would incur the following expenses by the end of each
period shown:
1 year 3 years 5 years 10 years*
------ ------- ------- ---------
Class A Shares $58 $80 $103 $171
Class B Shares $69 $90 $123 $180
If you did not redeem your investment, it would incur the following
expenses:
Class A Shares $58 $80 $103 $171
Class B Shares $19 $60 $103 $180
* The Class B expenses in years 7 through 10 are based on the Class A
expenses shown above, because the Fund automatically converts your Class
B shares into Class A shares after 6 years. Long-term Class B shareholders
could pay the economic equivalent of more than the maximum front-end sales
charge allowed under applicable regulations, because of the effect of the
asset-based sales charge and contingent deferred sales charge. The
automatic conversion is designed to minimize the likelihood that this will
occur. Please refer to "How to Buy Shares - Class B Shares" for more
information.
These examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or investment
returns of the Fund, all of which will vary.
<PAGE>
Financial Highlights
The table on this page presents selected financial information about
the Fund, including per share data and expense ratios and other data based
on the Fund's average net assets. This information has been audited by
Deloitte & Touche, the Fund's independent auditors, whose report on the
Fund's financial statements for the fiscal year ended December 31, 1993
is included in the Statement of Additional Information. The information
in the table for the fiscal periods prior to 1991 was audited by the
Fund's previous independent auditors. Class B shares were publicly
offered only during a portion of that period, commencing May 1, 1993.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CLASS A
---------------------------------------------------------------------------
ELEVEN
YEAR MONTHS
ENDED ENDED
DEC. 31, DEC. 31,
1993 1992 1991(3) 1990 1989 1988(2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $10.74 $10.80 $9.86 $10.29 $10.12 $10.55
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .69 .75 .82 .88(4) .92 .93
Net realized and unrealized
gain (loss) on investments .40 (.05) .90 (.43) .19 (.36)
------ ------ ------ ------ ------ ------
Total income from investment
operations 1.09 .70 1.72 .45 1.11 .57
- ----------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.71) (.76) (.78) (.88) (.94) (1.00)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.12 $10.74 $10.80 $9.86 $10.29 $10.12
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
- ----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(5) 10.30% 6.77% 18.28% 4.74% 11.31% 4.48%
- ----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $110,759 $106,290 $90,623 $87,021 $96,380 $102,293
- ----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $111,702 $98,672 $86,471 $90,065 $100,891 $111,264
- ----------------------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 9,963 9,899 8,390 8,829 9,369 10,108
- ----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 6.20% 7.00% 8.02% 8.85% 8.85% 8.75%
Expenses 1.06% 1.10% 1.23% 1.24%(4) 1.14% 1.05%
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 110.1% 116.4% 97.1% 80.4% 41.3% 45.0%
<CAPTION>
Class B
- -------------------------------------------------------------------------------------------------------- --------
PERIOD
ENDED
YEAR ENDED JANUARY 31, DEC. 31,
1988(2) 1987(2) 1986(2) 1985(2) 1984(2) 1993(1)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $11.30 $11.16 $10.91 $11.00 $11.07 $11.10
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 1.09 1.16 1.22 1.27 1.28 .40
Net realized and unrealized
gain (loss) on investments (.55) .22 .35 (.04) (.03) .03
-------- -------- -------- -------- -------- --------
Total income from investment
operations .54 1.38 1.57 1.23 1.25 .43
- ----------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (1.29) (1.24) (1.32) (1.32) (1.32) (.42)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.55 $11.30 $11.16 $10.91 $11.00 $11.11
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
- ----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(5) N/A N/A N/A N/A N/A 3.91%
- ----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $118,568 $125,513 $121,979 $117,293 $116,193 $1,809
- ----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $118,724 $123,045 $118,253 $111,235 $115,058 $922
- ----------------------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 11,234 11,103 10,930 10,751 10,563 163
- ----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 10.28% 10.45% 11.26% 12.21% 11.69% 4.80%(6)
Expenses .98% .93% .97% 1.01% .99% 1.90%(6)
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 19.5% 59.8% 36.5% 76.7% 49.9% 110.1%
<FN>
1. For the period from May 1, 1993 (inception of offering) to December 31, 1993.
2. Operating results prior to April 15, 1988 were achieved by the Fund's
predecessor corporation as a closed-end fund under different investment
objectives and policies. Such results are thus not necessarily representative of
operating results the Fund may achieve under its current investment objectives
and policies.
3. On March 28, 1991, Oppenheimer Management Corporation became the investment
advisor to the Fund.
4. Net investment income would have been $.87 absent the voluntary expense
limitation, resulting in an expense ratio of 1.26%.
5. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions reinvested
in additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales charges
are not reflected in the total returns.
6. Annualized.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the year
ended December 31, 1993 were $123,943,358 and $134,301,656, respectively.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
Investment Objective and Policies
Objective. The Fund seeks to achieve a high level of current income
consistent with prudent investment risk and the stability of capital
primarily though investment in a diversified portfolio of investment grade
fixed-income securities.
Investment Policies and Strategies. In seeking its investment
objective, the Fund only invests in (i) investment grade bonds - debt
securities rated BBB or above by Standard & Poor's Corporation ("S&P") or
Baa or above by Moody's Investors Service, Inc. ("Moody's") or, if
unrated, are of comparable quality as determined by the Fund's Sub-
Adviser, Massachusetts Mutual Life Insurance Company; (ii) U.S. Government
Securities; and (iii) high quality, short-term money market instruments.
Under normal market conditions, it is anticipated that the dollar-weighted
average life of the Fund's portfolio will be between five and ten years.
The dollar-weighted average portfolio maturity of the Fund as of December
31, 1993, was 6 years.
While the Fund will generally purchase only investment grade debt
securities, the Fund is permitted to hold lower-rated securities
(securities rated "Ba" or lower by Moody's or "BB" or lower by S&P) until
investment considerations indicate that their sale is appropriate or until
maturity. Lower-rated securities are considered speculative and involve
greater risk. They may be less liquid than higher-rated securities. If
the Fund were forced to sell a lower-rated debt security during a period
of rapidly-declining prices, it might experience significant losses
especially if a substantial number of other holders decide to sell at the
same time. Other risks may involve the default of the issuer or price
changes in the issuer's securities due to changes in the issuer's
financial strength or economic conditions. The Fund is not obligated to
dispose of securities when issuers are in default or if the rating of the
security is reduced. These risks are discussed in more detail in the
Statement of Additional Information.
When investing the Fund's assets, the Manager considers many factors,
including current developments and trends in both the economy and the
financial markets. The Fund may try to hedge against losses in the value
of its portfolio of securities by using hedging strategies described
below. The Fund's Sub-Adviser may employ special investment techniques,
also described below. Additional information about the securities the
Fund may invest in, the hedging strategies the Fund may employ and the
special investment techniques may be found under the same headings in the
Statement of Additional Information.
- Portfolio Turnover. While it is a policy of the Fund generally
not to engage in trading for short-term gains, portfolio changes will be
made without regard to the length of time a security has been held or
whether a sale would result in a profit or loss, if in the Sub-Adviser's
judgment, such transactions are advisable in light of the circumstances
of a particular company or within a particular industry or in light of
market, economic or financial conditions. Higher levels of portfolio
activity generally result in higher transaction costs and may also result
in taxes on realized capital gains to be borne by the Fund's shareholders.
See "Financial Highlights" above, "Dividends, Capital Gains and Taxes"
below and "Brokerage Policies of the Fund" in the Statement of Additional
Information.
- Interest Rate Risks. In addition to credit risks, described
below, debt securities are subject to changes in value due to changes in
prevailing interest rates. When prevailing interest rates fall, the
values of outstanding debt securities generally rise. Conversely, when
interest rates rise, the values of outstanding debt securities generally
decline. The magnitude of these fluctuations will be greater when the
average maturity of the portfolio securities is longer.
- Credit Risks. Debt securities are also subject to credit risks.
Credit risk relates to the ability of the issuer of a debt security to
make interest or principal payments on the security as they become due.
Generally, higher-yielding, lower-rated bonds (which the Fund may hold)
are subject to greater credit risk than higher-rated bonds. Securities
issued or guaranteed by the U.S. Government are subject to little, if any,
credit risk. While the Manager may rely to some extent on credit ratings
by nationally recognized rating agencies, such as S&P or Moody's, in
evaluating the credit risk of securities selected for the Fund's
portfolio, it may also use its own research and analysis. However, many
factors affect an issuer's ability to make timely payments, and there can
be no assurance that the credit risks of a particular security will not
change over time.
- Can the Fund's Investment Objective and Policies Change? The Fund
has an investment objective, which is described above, as well as
investment policies it follows to try to achieve its objective.
Additionally, the Fund uses certain investment techniques and strategies
in carrying out those policies. The Fund's investment policies and
practices are not "fundamental" unless the Prospectus or Statement of
Additional Information says that a particular policy is "fundamental."
Fundamental policies are those that cannot be changed without the
approval of a "majority" of the Fund's outstanding voting shares. The term
"majority" is defined in the Investment Company Act to be a particular
level of vote by outstanding voting shares (and this term is explained in
the Statement of Additional Information). The Fund's investment objective
is a fundamental policy. The Fund's Board of Trustees may change non-
fundamental policies without shareholder approval, although significant
changes will be described in amendments to this Prospectus.
Securities of Foreign Governments and Companies. The Fund may invest
in debt securities issued or guaranteed by foreign companies, and debt
securities of foreign governments or their agencies. These foreign
securities may include debt obligations such as government bonds,
debentures issued by companies, as well as notes. Some of these debt
securities may have variable interest rates or "floating" interest rates
that change in different market conditions. Those changes will affect the
income the Fund receives. These securities are described in more detail
in the Statement of Additional Information.
The Fund is not restricted in the amount of its assets it may invest
in foreign countries or in which countries. However, if the Fund's assets
are held abroad, the countries in which they are held and the sub-
custodians holding them must be approved by the Trust's Board of Trustees.
- Risks of Foreign Securities. Investing in foreign securities,
especially those issued in underdeveloped countries, generally involves
special risks. For example, foreign issuers are not subject to the same
accounting and disclosure requirements that U.S. companies are subject to.
The value of foreign investments may be affected by changes in foreign
currency rates, exchange control regulations, expropriation or
nationalization of a company's assets, foreign taxes, delays in settlement
of transactions, changes in governmental economic or monetary policy in
the U.S. or abroad, or other political and economic factors. If the Fund
distributes more income during a period than it earns because of
unfavorable currency exchange rates, those dividends may later have to be
considered a return of capital. More information about the risks and
potential rewards of foreign securities is contained in the Statement of
Additional Information.
U.S. Government Securities. Certain U.S. Government securities,
including U.S. Treasury bills, notes and bonds, and mortgage participation
certificates guaranteed by Government National Mortgage Association
("Ginnie Mae") are supported by the full faith and credit of the U.S.
government, which in general terms means that the U.S. Treasury stands
behind the obligation to pay principal and interest. Ginnie Mae
certificates are one type of mortgage-related U.S. Government Security the
Fund invests in. Other mortgage-related U.S. Government Securities the
Fund invests in that are issued or guaranteed by federal agencies or
government-sponsored entities are not supported by the full faith and
credit of the U.S. government. Those securities include obligations
supported by the right of the issuer to borrow from the U.S. Treasury,
such as obligations of Federal Home Loan Mortgage Corporation ("Freddie
Mac"), obligations supported only by the credit of the instrumentality,
such as Federal National Mortgage Association ("Fannie Mae") and
obligations supported by the discretionary authority of the U.S.
Government to repurchase certain obligations of U.S. Government agencies
or instrumentalities such as the Federal Land Banks and the Federal Home
Loan Banks. Other U.S. Government Securities the Fund invests in are
collateralized mortgage obligations ("CMOs").
The value of U.S. Government Securities will fluctuate depending on
prevailing interest rates. Because the yields on U.S. Government
Securities are generally lower than on corporate debt securities, when the
Fund holds U.S. Government Securities it may attempt to increase the
income it can earn from them by writing covered call options against them,
when market conditions are appropriate. Writing covered calls is
explained below, under "Other Investment Techniques and Strategies."
- Mortgage-Backed U.S. Government Securities and CMOs. Certain
mortgage-backed U.S. Government securities "pass-through" to investors the
interest and principal payments generated by a pool of mortgages assembled
for sale by government agencies. Pass-through mortgage-backed securities
entail the risk that principal may be repaid at any time because of
prepayments on the underlying mortgages. That may result in greater price
and yield volatility than traditional fixed-income securities that have
a fixed maturity and interest rate.
The Fund may also invest in CMOs, which generally are obligations
fully collateralized by a portfolio of mortgages or mortgage-related
securities. Payment of the interest and principal generated by the pool
of mortgages is passed through to the holders as the payments are
received. CMOs are issued with a variety of classes or series which have
different maturities. Certain CMOs may be more volatile and less liquid
than other types of mortgage-related securities, because of the
possibility of the prepayment of principal due to prepayments on the
underlying mortgage loans.
- Short-Term Debt Securities. The high quality, short-term money
market instruments in which the Fund may invest include U.S. Treasury and
agency obligations; commercial paper (short-term, unsecured, negotiable
promissory notes of a domestic or foreign company), short-term obligations
of corporate issuers; bank participation certificates; and certificates
of deposit and bankers' acceptances (time drafts drawn on commercial banks
usually in connection with international transactions) of banks and
savings and loan associations.
- Asset-Backed Securities. The Fund may invest in securities that
represent fractional undivided interests in pools of consumer loans,
similar in structure to the mortgage-backed securities in which the Fund
may invest, described above. Payments of principal and interest are
passed through to holders of asset-backed securities and are typically
supported by some form of credit enhancement, such as a letter of credit,
surety bond, or limited guarantee by another entity or having a priority
to certain of the borrower's other securities. The degree of credit
enhancement varies, and generally applies, until exhausted, to only a
fraction of the asset-backed security's par value. If the credit
enhancement of an asset-backed security held by the Fund has been
exhausted, and if any required payments of principal and interest are not
made with respect to the underlying loans, the Fund may then experience
losses or delays in receiving payment. Further details are set forth in
the Statement of Additional Information under "Investment Objective and
Policies - Asset-Backed Securities."
Other Investment Techniques and Strategies. The Fund may also use the
investment techniques and strategies described below, which involve
certain risks. The Statement of Additional Information contains more
detailed information about these practices, including limitations designed
to reduce some of the risks.
- Writing Covered Calls. The Fund may write (i.e., sell) covered
call options ("calls") to raise cash for liquidity purposes (for example,
to meet redemption requirements) or for defensive reasons. The Fund may
write calls only if certain conditions are met: (1) the calls must be
listed on a domestic or foreign securities exchange or over-the-counter,
and (2) each call must be "covered" while it is outstanding; that is, the
Fund must own the securities on which the call is written or it must own
other securities that are acceptable for the escrow arrangements required
for calls. If a covered call written by the Fund is exercised on a
security that has increased in value, the Fund will be required to sell
the security at the call price and will not be able to realize any profit
on the security above the call price.
- Hedging With Options and Futures Contracts. The Fund may buy and
sell options and futures contracts to manage its exposure to changing
interest rates, securities prices and currency exchange rates. Some of
these strategies, such as selling futures, buying puts and writing calls,
hedge the Fund's portfolio against price fluctuations. Other hedging
strategies, such as buying futures, writing puts and buying calls, tend
to increase market exposure. The put and call options which the Fund may
purchase and sell are exchange-traded or over-the-counter options. The
Fund may invest in futures, where the securities which underlie such
contracts are permissible investments for the Fund, index-based futures
contracts which are appropriately correlated with the Fund's portfolio,
the Fund may purchase and sell call and put options on futures contracts,
and the Fund may engage in related closing transactions with respect to
such options on futures contracts. The Fund may also invest in interest
rate swap transactions. All of these are referred to as "hedging
instruments." The initial margin deposits for futures contracts and
premiums paid for related options may not exceed 5% of the value of the
Fund's total assets. Writing puts requires the segregation of liquid
assets to cover the put. The Fund does not use futures and options on
futures for speculative purposes.
The use of hedging instruments may include special risks. Hedging
instruments can be volatile investments and may involve certain risks.
If the Manager or Sub-Adviser uses a hedging instrument at the wrong time
or judges market conditions incorrectly, hedging strategies may reduce the
Fund's return. The Fund could also experience losses if the prices of its
futures and options positions were not correlated with its other
investments or if it could not close out a position because of an illiquid
market for the future or option. Interest rate swaps are subject to
credit risks (if the other party fails to meet its obligations) and also
to interest rate risks, because the Fund could be obligated to pay more
under its swap agreements than it receives under them, as a result of
interest rate changes.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There is also special risks in particular hedging
strategies. For example, in writing puts, there is a risk that the Fund
may be required to buy the underlying security at a disadvantageous price.
These risks and the hedging strategies the Fund may use are described in
greater detail in the Statement of Additional Information.
- Illiquid and Restricted Securities. Under the policies and
procedures established by the Trust's Board of Trustees, the Manager
determines the liquidity of the Fund's investments. Investments may be
illiquid because of the absence of an active trading market, making it
difficult to value them or dispose of them promptly at an acceptable
price. A restricted security is one that has a contractual restriction
on its resale or which cannot be sold publicly until it is registered
under the Securities Act of 1933. The Fund will not invest more than 10%
of its net assets in illiquid or restricted securities (that limit may
increase to 15% if certain state laws are changed or the Fund's shares are
no longer sold in those states). Certain restricted securities, eligible
for resale to qualified institutional purchasers, are not subject to that
limit.
- Loans of Portfolio Securities. The Fund may lend its portfolio
securities amounting to not more than 25% of its total assets to brokers,
dealers and other financial institutions, subject to certain conditions
described in the Statement of Additional Information. The Fund presently
does not intend to lend its portfolio securities, but if it does, the
value of securities loaned is not expected to exceed 5% of the value of
the Fund's total assets in the coming year.
- Repurchase Agreements. The Fund may enter into repurchase
agreements. There is no limit on the amount of the Fund's net assets that
may be subject to repurchase agreements of seven days or less. The Fund
will not enter into a repurchase agreement that will cause more than 15%
of the Fund's net assets to be subject to repurchase agreements maturing
in more than seven days. Repurchase agreements must be fully
collateralized. However, if the vendor of the securities under a
repurchase agreement fails to pay the resale price on the delivery date,
the Fund may incur costs in disposing of the collateral and may experience
losses if there is any delay in its ability to do so.
- Forward Commitments. The Fund may enter into contracts to
purchase securities for a fixed price at a specified future date beyond
customary settlement time ("forward commitments"). Forward commitments
involve a risk of loss if the value of the security to be purchased
declines prior to the settlement date, which risk is in addition to the
risk of decline in value of the Fund's other assets. The Fund may realize
short-term gains or losses upon the sale of forward commitments.
- "When-Issued" and Delayed Delivery Transactions. The Fund may
purchase securities on a "when-issued" basis and may purchase or sell
securities on a "delayed delivery" basis. These terms refer to securities
that have been created and for which a market exists, but which are not
available for immediate delivery. There may be a risk of loss to the Fund
if the value of the security declines prior to the settlement date.
- Derivative Instruments. The Fund can invest in a number of
different kinds of "derivative securities." In general, a "derivative
security" is a specially designed investment whose performance is linked
to the performance of an underlying security or investment, such as an
option, future or index. The risks of investing in such securities
include not only the ability of the company issuing the security to pay
the amount due on the security, but also the risk that the underlying
security or investment might not perform the way the Manager expected it
to perform. Examples include, among others, "index-linked" notes, which
are debt securities of companies that call for payment on different terms
than the typical note where the borrower pays back a fixed sum on maturity
of the notes. The payment of an index-linked note depends on the
performance of one or more market indices, such as the S&P 500 Index.
Other examples include "debt exchangeable for common stock" of the issuer
or "equity-linked debt securities" of the issuer. At maturity, the
principal amount of the debt security is exchanged for common stock of the
issuer or is payable based on the issuer's common stock price. A risk in
either case is that the amount payable at maturity is less than the
pricipal amount of the debt.
- Other Investment Restrictions. The Fund has other investment
restrictions which are fundamental policies.
Under these fundamental policies, the Fund cannot do any of the
following: (1) make short sales except for sales "against the box"; (2)
borrow money or enter into reverse repurchase agreements, except that the
Fund may borrow money from banks and enter into reverse repurchase
agreements as a temporary measure for extraordinary or emergency purposes
(but not for the purpose of making investments), provided that the
aggregate amount of all such borrowings and commitments under such
agreements does not, at the time of borrowing or of entering into such an
agreement, exceed 10% of the Fund's total assets taken at current market
value; the Fund will not purchase additional portfolio securities at any
time that the aggregate amount of its borrowings and its commitments under
reverse repurchase agreements exceeds 5% of the Fund's net assets (for
purposes of this restriction, entering into portfolio lending agreements
shall not be deemed to constitute borrowing money); (3) concentrate its
investments in any particular industry except that it may invest up to 25%
of the value of its total assets in the securities of issuers in any one
industry (of the utility companies, gas, electric, water and telephone
will each be considered as a separate industry); and (4) buy securities
issued or guaranteed by any one issuer (except the U.S. Government or any
of its agencies or instrumentalities) if with respect to 75% of its total
assets (a) more than 5% of the Fund's total assets would be invested in
the securities of that issuer, or (b) the Fund would own more than 10% of
that issuer's voting securities.
All of the percentage restrictions described above and elsewhere in
this Prospectus apply only at the time the Fund purchases a security, and
the Fund need not dispose of a security merely because the Fund's assets
have changed or the security has increased in value relative to the size
of the Fund. There are other fundamental policies discussed in the
Statement of Additional Information.
How the Fund is Managed
Organization and History. Oppenheimer Integrity Funds (the "Trust") was
organized in 1982 as a multi-series Massachusetts business trust and the
Fund is a series of that Trust. That Trust is an open-end, diversified
management investment company, with an unlimited number of authorized
shares of beneficial interest. Each of the two series of the Trust is a
fund that issues its own shares, has its own investment portfolio, and its
own assets and liabilities.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The
Trustees meet periodically throughout the year to oversee the Fund's
activities, review its performance, and review the actions of the Manager.
"Trustees and Officers of the Fund" in the Statement of Additional
Information names the Trustees and provides more information about them
and the officers of the Fund. Although the Fund is not required by law
to hold annual meetings, it may hold shareholder meetings from time to
time on important matters, and shareholders have the right to call a
meeting to remove a Trustee or to take other action described in the
Fund's Declaration of Trust.
The Board of Trustees has the power, without shareholder approval,
to divide unissued shares of the Fund into two or more classes. Each
class has its own dividends and distributions, and pays certain expenses
which may be different for the different classes. Each class may have a
different net asset value. The Board has done so, and the Fund currently
has two classes of shares, Class A and Class B. Each share has one vote
at shareholder meetings, with fractional shares voting proportionally.
Only shares of a class vote together on matters that affect that class
alone. Shares are freely transferrable.
The Manager and Its Affiliates. Since March 28, 1991, the Fund is
managed by the Manager, which handles its day-to-day business. The
Manager carries out its duties, subject to the policies established by the
Board of Trustees, under an Investment Advisory Agreement which states the
Manager's responsibilities and its fees, and describes the expenses that
the Fund pays to conduct its business. The Manager has entered into a
contract with Massachusetts Mutual Life Insurance Company to act as the
Fund's Sub-Adviser. The Sub-Adviser is responsible for choosing the
Fund's investments and its duties and responsibilities are set forth in
the contract with the Manager. The Manager, not the Fund, pays the Sub-
Adviser.
The Manager has operated as an investment adviser since 1959. The
Manager and its affiliates currently manage investment companies,
including other OppenheimerFunds, with assets of more than $27 billion as
of December 31, 1993, and with more than 1.8 million shareholder accounts.
The Manager is owned by Oppenheimer Acquisition Corp., a holding company
that is owned in part by senior officers of the Manager and controlled by
the Sub-Adviser.
- Portfolio Manager. The Portfolio Manager of the Fund (who is also
a Vice President of the Fund) is Mary E. Wilson, a Vice President and
Managing Director of the Sub-Adviser. She has been responsible for the
day-to-day management of the Fund's portfolio since March, 1991. Ms.
Wilson also serves as Senior Vice President of MML Series Investment Fund
and Vice President of Mass Mutual Participation Investors and MassMutual
Corporate Investors.
- Fees and Expenses. Under the Investment Advisory Agreement, the
Fund pays the Manager the following annual fees, which decline on
additional assets as the Fund grows: 0.50% of the first $100 million of
the Fund's average annual net assets, 0.45% of the next $200 million,
0.40% of the next $200 million, and 0.35% of net assets in excess of $500
million. The Fund's management fee for its last fiscal year was 0.50% of
average annual net assets for Class A shares and 0.50% for Class B shares.
Under the Sub-Advisory Agreement, the Manager pays the Sub-Advisor
the following annual fees, which decline on additional assets as the Fund
grows: 0.35% of the first $100 million of the
Fund's average annual net assets; 0.25% of the next $200 million, 0.20%
of the next $200 million; and 0.15% of net assets in excess of $500
million.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal and auditing
costs. Those expenses are paid out of the Fund's assets and are not paid
directly by shareholders. However, those expenses reduce the net asset
value of shares, and therefore are indirectly borne by shareholders
through their investment. More information about the investment advisory
agreement and the other expenses paid by the Fund is contained in the
Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of
Additional Information. That section discusses how brokers and dealers
are selected for the Fund's portfolio transactions. Because the Fund
purchases most of its portfolio securities directly from the sellers and
not through brokers, it incurs relatively little expense for brokerage.
From time to time it may use brokers when buying portfolio securities.
When deciding which brokers to use, the Investment Advisory Agreement
allows the Manager to consider whether brokers have sold shares of the
Fund or any other funds for which the Manager or the Sub-Adviser or their
affiliates exercise investment discretion.
- The Distributor. The Fund's shares are sold through dealers and
brokers that have a sales agreement with Oppenheimer Funds Distributor,
Inc., a subsidiary of the Manager that acts as the Distributor. The
Distributor also distributes the shares of other mutual funds managed by
the Manager (the "OppenheimerFunds") and is sub-distributor for funds
managed by a subsidiary of the Manager.
- The Transfer Agent. The Fund's transfer agent is Oppenheimer
Shareholder Services, a division of the Manager, which acts as the
shareholder servicing agent for the Fund and the other
OppenheimerFunds on an "at-cost" basis. Shareholders should direct
inquiries about their accounts to the Transfer Agent at the address and
toll-free numbers shown below in this Prospectus and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses certain terms
to illustrate its performance: "total return" and "yield." These terms
are used to show the performance of each class of shares separately,
because the performance of each class of shares will usually be different,
as a result of the different kinds of expenses each class bears. This
performance information may be published useful to help you see how well
your investment has done and to compare it to other funds or market
indices, as we have done below.
It is important to understand that the Fund's yields and total
returns represent past performance and should not be considered to be
predictions of future returns or performance. This performance data is
described below, but more detailed information about how total returns and
yields are calculated is contained in the Statement of Additional
Information, which also contains information about other ways to measure
and compare the Fund's performance. The Fund's investment performance
will vary, depending on market conditions, the composition of the
portfolio, expenses and which class of shares you purchase.
- Total Returns. There are different types of total returns used
to measure the Fund's performance. Total return is the change in value
of a hypothetical investment in the Fund over a given period, assuming
that all dividends and capital gains distributions are reinvested in
additional shares. The cumulative total return measures the change in
value over the entire period (for example, ten years). An average annual
total return shows the average rate of return for each year in a period
that would produce the cumulative total return over the entire period.
However, average annual total returns do not show the Fund's actual year-
by-year performance.
When total returns are quoted for Class A shares, they reflect the
payment of the maximum initial sales charge. Total returns may be also
quoted "at net asset value," without considering the effect of the sales
charge, and those returns would be reduced if sales charges were deducted.
When total returns are shown for a one-year period for Class B shares,
they reflect the effect of the contingent deferred sales charge. They may
also be shown based on the change in net asset value, without considering
the effect of the contingent deferred sales charge.
- Yield. Each Class of shares calculates its yield by dividing the
annualized net investment income per share on the portfolio during a 30-
day period by the maximum offering price on the last day of the period.
The yield of each Class will differ because of the different expenses of
each Class of shares. The yield data represents a hypothetical investment
return on the portfolio, and does not measure an investment return based
on dividends actually paid to shareholders. To show that return, a
dividend yield may be calculated. Dividend yield is calculated by
dividing the dividends of a Class derived from net investment income
during a stated period by the maximum offering price on the last day of
the period. Yields and dividend yields for Class A shares reflect the
deduction of the maximum initial sales charge, but may also be shown based
on the Fund's net asset value per share. Yields for Class B shares do not
reflect the deduction of the contingent deferred sales charge.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year ended December 31, 1993,
followed by a graphical comparison of the Fund's performance to an
appropriate broad-based market index.
- Management's Discussion of Performance. Throughout most of 1993
the U.S. economy continued to grow slowly and interest rates declined
steadily. This caused the value of many corporate bonds in the Fund's
portfolio to appreciate. When the Manager felt that interest rates had
reached their lowest point, the Manager sold a number of bonds at a
substantial profit. In anticipation of rising interest rates, the Manager
reinvested the proceeds from the sale of those bonds into investments with
higher credit ratings to help protect the Fund's net asset value. In
addition, the Manager emphasized investments in short-term U.S.
Treasuries, which are less likely to fluctuate in price than longer-term
securities in a rising interest rate environment. The historically low
interest rates experienced over the past year have caused volatility in
the mortgage-backed securities market. To insulate the Fund's portfolio
from this effect, the Manager invested in a combination of very short-term
mortgage-backed securities, which have a low risk of prepayment, and
highly seasoned mortgage-backed securities that have already survived
several refinancing waves.
- Comparing the Fund's Performance to the Market. The chart below
shows the performance of a hypothetical $10,000 investment in each Class
of shares of the Fund held until December 31, 1993; in the case of Class
A shares, since the inception of the Class on April 15, 1988, and in the
case of Class B shares, from the inception of the Class on May 1, 1993,
with all dividends and capital gains distributions reinvested in
additional shares. The graph reflects the deduction of the 4.75% maximum
initial sales charge on Class A shares and the maximum 5% contingent
deferred sales charge on Class B shares.
Because the Fund invests in investment grade fixed-income securities,
the Fund's performance is compared to the performance of the Lehman
Brothers Corporate Bond Index, a broad-based, unmanaged index of publicly-
issued nonconvertible investment grade corporate debt of U.S. issuers,
widely recognized as a measure of the U.S. fixed-rate corporate bond
market. It includes a factor for the reinvestment of interest, but does
not reflect expenses or taxes. Index performance reflects reinvestment
of income but not capital gains or transaction costs, and none of the data
below shows the effect of taxes. Also, the Fund's performance data
reflects the effect of Fund business and operating expenses. While index
comparisons may be useful to provide a benchmark for the Fund's
performance, it must be noted that the Fund's investments are not limited
to the securities in any one index and the index data does not reflect any
assessment of the risk of the investments included in the index.
Oppenheimer Investment Grade Bond Fund
Comparison of Change in Value
of $10,000 Hypothetical Investment to
Lehman Brothers Corporate Bond Index
(Graph)
Past Performance is not predictive of future performance.
Oppenheimer Investment Grade Bond Fund
Average Annual Total Return at 12/31/93
1 Year 5 Year Life*
Class A: 5.06% 9.12% 8.77%
Cumulative Total Return at 12/31/93
Class B: -1.09%**
_____________________________
* The Fund began operations on 4/15/88
** Class B shares of the Fund first publicly sold on 5/1/93
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund offers investors two different classes
of shares. The different classes of shares represent investments in the
same portfolio of securities but are subject to different expenses and
will likely have different share prices.
- Class A Shares. If you buy Class A shares, you pay an initial
sales charge (on investments up to $1 million). If you purchase Class A
shares as part of an investment of at least $1 million in shares of one
or more OppenheimerFunds, and you sell any of those shares within 18
months after your purchase, you will pay a contingent deferred sales
charge.
- Class B Shares. If you buy Class B shares, you pay no sales
charge at the time of purchase, but if you sell your shares within six
years, you will normally pay a contingent deferred sales charge that
varies depending on how long you own your shares.
Which Class of Shares Should You Choose? Once you decide that the Fund
is an appropriate investment for you, the decision as to which class of
shares is better suited to your needs depends on a number of factors which
you should discuss with your financial advisors:
- How Much Do You Plan To Invest? If you plan to invest a
substantial amount, the reduced sales charges available for larger
purchases of Class A shares may be more beneficial to you, and for
purchases over $1 million, the contingent deferred sales charge on Class
A shares may be more beneficial. The Distributor will not accept any order
for $1 million or more for Class B shares on behalf of a single investor
for that reason.
- How Long Do You Expect To Hold Your Investment? While future
financial needs cannot be predicted with certainty, investors who prefer
not to pay an initial sales charge and who plan to hold their shares for
more than five years might consider Class B shares. Investors who plan to
redeem shares before the end of five years might prefer Class A shares.
- Are There Differences In Account Features That Matter To You?
Because some account features may not be available for Class B
shareholders, such as checkwriting, you should carefully review how you
plan to use your investment account before deciding which class of shares
is better for you. Additionally, the dividends payable to Class B
shareholders will be reduced by the additional expenses borne solely by
that class, such as the asset-based sales charge to which Class B shares
are subject, as described below and in the Statement of Additional
Information.
- How Does It Affect Payments To My Broker? A salesperson or any
other person who is entitled to receive compensation for selling Fund
shares may receive different compensation for selling one class than for
selling another class. It is important that investors understand that the
purpose of the contingent deferred sales charge and asset-based sales
charge for Class B shares is the same as the purpose of the front-end
sales charge on sales of Class A shares.
How Much Must You Invest? You can open a Fund account with a minimum
initial investment of $1,000 and make additional investments at any time
with as little as $25. There are reduced minimum investments under special
investment plans:
- With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7)
custodial plans and military allotment plans, you can make initial and
subsequent investments for as little as $25; and subsequent purchases of
at least $25 can be made by telephone through AccountLink.
- Under pension and profit-sharing plans and Individual Retirement
Accounts (IRAs), you can make an initial investment of as little as $250
(if your IRA is established under an Asset Builder Plan, the $25 minimum
applies), and subsequent investments may be as little as $25.
- There is no minimum investment requirement if you are buying
shares by reinvesting dividends from the Fund or other OppenheimerFunds
(a list of them appears in the Statement of Additional Information, or you
can ask your dealer or call the Transfer Agent), or by reinvesting
distributions from unit investment trusts that have made arrangements with
the Distributor.
How Are Shares Purchased? You can buy shares several ways -- through any
dealer, broker or financial institution that has a sales agreement with
the Distributor, or directly through the Distributor, or automatically
from your bank account through an Asset Builder Plan under the
OppenheimerFunds AccountLink service. When you buy shares, be sure to
specify Class A or Class B shares. If you do not choose, your investment
will be made in Class A shares.
- Buying Shares Through Your Dealer. Your dealer will place your
order with the Distributor on your behalf.
- Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "Oppenheimer Funds Distributor, Inc." Mail it to P.O. Box 5270,
Denver, Colorado 80217. If you don't list a dealer on the application,
the Distributor will act as your agent in buying the shares.
- Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or
other financial institution that is an Automated Clearing House (ACH)
member, to transmit funds electronically to purchase shares, to send
redemption proceeds, and to transmit dividends and distributions. Shares
are purchased for your account on the regular business day the Distributor
is instructed by you to initiate the ACH transfer to buy shares. You can
provide those instructions automatically, under an Asset Builder Plan,
described below, or by telephone instructions using OppenheimerFunds
PhoneLink, also described below. You must request AccountLink privileges
on the application or dealer settlement instructions used to establish
your account. Please refer to "AccountLink," below for more details.
- At What Price Are Shares Sold? Shares are sold at the public
offering price based on the net asset value that is next determined after
the Distributor receives the purchase order in Denver. In most cases, to
receive that day's offering price, the Distributor must receive your order
by 4:00 P.M., New York time (all references to time in this Prospectus
mean "New York time."). The net asset value of each class of shares is
determined as of that time on each day The New York Stock Exchange is open
(which is a "regular business day"). If you buy shares through a dealer,
the dealer must receive your order by 4:00 P.M., on a regular business day
and transmit it to the Distributor so that it is received before the
Distributor's close of business that day, which is normally 5:00 P.M. The
Distributor may reject any purchase order for the Fund's shares, in its
sole discretion.
- Asset Builder Plans. You may purchase shares of the Fund (and up
to four other OppenheimerFunds) automatically each month from your account
at a bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of
Additional Information.
- Class A Shares. Class A shares are sold at their offering price,
which is normally net asset value plus an initial sales charge. However,
in some cases, described below, where purchases are not subject to an
initial sales charge, the offering price may be net asset value. In some
cases, reduced sales charges may be available, as described below. When
you invest, the Fund receives the net asset value for your account. The
sales charge varies depending on the amount of your purchase and a portion
may be retained by the Distributor and allocated to your dealer. The
current sales charge rates and commissions paid to dealers and brokers are
as follows:
<TABLE>
<CAPTION>
Front-End Front-End
Sales Charge Sales Charge Commission
as Percentage as Approximate as Percentage
of Offering Percentage of of Offering
Amount of Purchase Price Amount Invested Price
- ------------------ ------------- --------------- -------------
<S> <C> <C> <C>
Less than $50,000 4.75% 4.98% 4.00%
$50,000 or more but
less than $100,000 4.50% 4.71% 3.75%
$100,000 or more but
less than $250,000 3.50% 3.63% 2.75%
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
- --------------------------
The Distributor reserves the right to reallow the entire commission to
dealers. If that occurs, the dealer may be considered an "underwriter"
under Federal securities laws.
</TABLE>
- Class A Contingent Deferred Sales Charge. There is no initial
sales charge on purchases of Class A shares of any one or more
OppenheimerFunds aggregating $1 million or more. However, the Distributor
pays dealers of record commissions on such purchases in an amount equal
to the sum of 1.0% of the first $2.5 million, plus 0.50% of the next $2.5
million, plus 0.25% of share purchases over $5 million. However, that
commission will be paid only on the amount of those purchases in excess
of $1 million that were not previously subject to a front-end sales charge
and dealer commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge
(called the "Class A contingent deferred sales charge") will be deducted
from the redemption proceeds. That sales charge will be equal to 1.0% of
the aggregate net asset value of either (1) the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate commissions the Distributor paid to your dealer on all Class A
shares of all OppenheimerFunds you purchased subject to the Class A
contingent deferred sales charge. In determining whether a contingent
deferred sales charge is payable, the Fund will first redeem shares that
are not subject to the sales charge, including shares purchased by
reinvestment of dividends and capital gains, and then will redeem other
shares in the order that you purchased them. The Class A contingent
deferred sales charge is waived in certain cases described in "Waivers of
Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges
of shares under the Fund's Exchange Privilege (described below). However,
if the shares acquired by exchange are redeemed within 18 months of the
end of the calendar month of the purchase of the exchanged shares, the
sales charge will apply.
- Special Arrangements With Dealers. The Distributor may advance
up to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients. Dealers whose sales of Class A shares of OppenheimerFunds (other
than money market funds) under OppenheimerFunds-sponsored 403(b)(7)
custodial plans exceed $5 million per year (calculated per quarter), will
receive monthly one-half of the Distributor's retained commissions on
those sales, and if those sales exceed $10 million per year, those dealers
will receive the Distributor's entire retained commission on those sales.
The Distributor sponsors an annual sales conference to which a dealer firm
is eligible to send, with a guest, a registered representative who sells
more than $2.5 million of Class A shares of OppenheimerFunds (other than
money market funds) in a calendar year, or the dealer may, at its option,
receive the equivalent cash value of that award as additional commission.
Reduced Sales Charges for Class A Share Purchases. You may be eligible
to buy Class A shares at reduced sales charge rates in one or more of the
following ways:
- Right of Accumulation. You and your spouse can cumulate Class A
shares you purchase for your own accounts, or jointly, or on behalf of
your children who are minors, under trust or custodial accounts. A
fiduciary can cumulate shares purchased for a trust, estate or other
fiduciary account (including one or more employee benefit plans of the
same employer) that has multiple accounts.
Additionally, you can cumulate current purchases of Class A shares
of the Fund and other OppenheimerFunds with Class A shares of
OppenheimerFunds you previously purchased subject to a sales charge,
provided that you still hold your investment in one of the
OppenheimerFunds; the value of those shares will be based on the greater
of the amount you paid for the shares or their current value (at offering
price). The OppenheimerFunds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Transfer Agent. The reduced sales charge will apply only to current
purchases and must be requested when you buy your shares.
- Letter of Intent. Under a Letter of Intent, you may purchase
Class A shares of the Fund and other OppenheimerFunds during a 13-month
period at the reduced sales charge rate that applies to the aggregate
amount of the intended purchases, including purchases made up to 90 days
before the date of the Letter. More information is contained in the
Application and in "Reduced Sales Charges" in the Statement of Additional
Information.
- Waivers of Class A Sales Charges. No sales charge is imposed on
sales of Class A shares to the following investors: (1) the Manager or its
affiliates; (2) present or former officers, directors, trustees and
employees (and their "immediate families" as defined in "Reduced Sales
Charges" in the Statement of Additional Information) of the Fund, the
Manager and its affiliates, and retirement plans established by them for
their employees; (3) registered management investment companies, or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose; (4) dealers or brokers that
have a sales agreement with the Distributor, if they purchase shares for
their own accounts or for retirement plans for their employees; (5)
employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and are identified
to the Distributor) or with the Distributor; the purchaser must certify
to the Distributor at the time of purchase that the purchase is for the
purchaser's own account (or for the benefit of such employee's spouse or
minor children); (6) dealers, brokers or registered investment advisers
that have entered into an agreement with the Distributor providing
specifically for the use of shares of the Fund in particular investment
products made available to their clients.
Additionally, no sales charge is imposed on shares that are (a)
issued in plans of reorganization, such as mergers, asset acquisitions and
exchange offers, to which the Fund is a party or (b) purchased by the
reinvestment of loan repayments by a participant in a retirement plan for
which the Manager or its affiliates acts as sponsor, or (c) purchased by
the reinvestment of dividends or other distributions reinvested from the
Fund or other OppenheimerFunds (other than the Cash Reserves Funds) or
unit investment trusts for which reinvestment arrangements have been made
with the Distributor. There is a further discussion of this policy in
"Reduced Sales Charges" in the Statement of Additional Information.
The Class A contingent deferred sales charge is also waived if shares
are redeemed in the following cases: (1) retirement distributions or loans
to participants or beneficiaries from qualified retirement plans, deferred
compensation plans or other employee benefit plans ("Retirement Plans"),
(2) returns of excess contributions made to Retirement Plans, (3)
Automatic Withdrawal Plan payments that are limited to no more than 12%
of the original account value annually, and (4)
involuntary redemptions of shares by operation of law or under the
procedures set forth in the Fund's Declaration of Trust or adopted by the
Board of Trustees.
- Service Plan for Class A Shares. The Fund has adopted a Service
Plan for Class A shares to reimburse the Distributor for a portion of its
costs incurred in connection with the personal service and maintenance of
accounts that hold Class A shares. Reimbursement is made quarterly at an
annual rate that may not exceed 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor uses all of those fees to
compensate dealers, brokers, banks and other financial institutions
quarterly for providing personal service and maintenance of accounts of
their customers that hold Class A shares and to reimburse itself (if the
Fund's Board of Trustees authorizes such reimbursements, which it has not
yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor.
Payments are made by the Distributor quarterly at an annual rate not to
exceed 0.25% of the average annual net assets of Class A shares held in
accounts of the dealer or its customers. The payments under the Plan
increase the annual expenses of Class A shares. For more details, please
refer to "Distribution and Service Plans" in the Statement of Additional
Information.
Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed
within 6 years after their purchase, a contingent deferred sales charge
will be deducted from the redemption proceeds. That sales charge will not
apply to shares purchased by the reinvestment of dividends or capital
gains distributions. The charge will be assessed on the lesser of the net
asset value of the shares at the time of redemption or the original
purchase price. The contingent deferred sales charge is not imposed on the
amount of your account value represented by the increase in net asset
value over the initial purchase price (including increases due to the
reinvestment of dividends and capital gains distributions). The Class B
contingent deferred sales charge is paid to the Distributor to reimburse
its expenses of providing distribution-related services to the Fund in
connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 6 years, and (3) shares held the longest during the
6-year period.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
Contingent Deferred Sales Charge
Years Since Purchase Payment on Redemptions in that Year
Was Made (As % of Amount Subject to Charge)
- ---------------------------- ----------------------------------
0 - 1 5.0%
1 - 2 4.0%
2 - 3 3.0%
3 - 4 3.0%
4 - 5 2.0%
5 - 6 1.0%
6 and following None
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of the
month in which the purchase was made.
- Waivers of Class B Sales Charge. The Class B contingent deferred
sales charge will be waived if the shareholder requests it for any of the
following redemptions: (1) distributions to participants or beneficiaries
from Retirement Plans, if the distributions are made (a) under an
Automatic Withdrawal Plan after the participant reaches age 59-1/2, as
long as the payments are no more than 10% of the account value annually
(measured from the date the Transfer Agent receives the request), or (b)
following the death or disability (as defined in the Internal Revenue
Code) of the participant or beneficiary; (2) redemptions from accounts
other than Retirement Plans following the death or disability of the
shareholder (you must provide evidence of a determination of disability
by the Social Security Administration), and (3) returns of excess
contributions to Retirement Plans.
The contingent deferred sales charge is also waived on Class B shares
in the following cases: (i) shares sold to the Manager or its affiliates;
(ii) shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or
the Distributor for that purpose; (iii) shares issued in plans of
reorganization to which the Fund is a party; and (iv) shares redeemed in
involuntary redemptions as described above. Further details about this
policy are contained in "Reduced Sales Charges" in the Statement of
Additional Information.
- Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to Class
A shares. This conversion feature relieves Class B shareholders of the
asset-based sales charge that applies to Class B shares under the Class
B Distribution Plan, described below. The conversion is based on the
relative net asset value of the two classes, and no sales load or other
charge is imposed. When Class B shares convert, any other Class B shares
that were acquired by the reinvestment of dividends and distributions on
the converted shares will also convert to Class A shares. The conversion
feature is subject to the continued availability of a tax ruling described
in "Alternative Sales Arrangements - Class A and Class B Shares" in the
Statement of Additional Information.
- Distribution and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to compensate
the Distributor for its services and costs in distributing Class B shares
and servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class B shares that
are outstanding for less than 6 years. The Distributor also receives a
service fee of 0.25% per year. Both fees are computed on the average
annual net assets of Class B shares, determined as of the close of each
regular business day. The asset-based sales charge allows investors to buy
Class B shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell Class B shares.
The Distributor uses the service fee to compensate dealers for
providing personal services and the maintenance of shareholder accounts
that hold Class B shares. Those services are similar to those provided
under the Class A Service Plan, described above. The asset-based sales
charge and service fees increase Class B expenses by up to 1.00% of
average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class B shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 3.75% of the
purchase price to dealers from its own resources at the time of sale. The
Distributor retains the asset-based sales charge to recoup the sales
commissions it pays, the advances of service fee payments it makes, and
its financing costs.
Because the Distributor's actual expenses in selling Class B shares
may be more than the payments it receives from contingent deferred sales
charges collected on redeemed shares and from the Fund under the
Distribution and Service Plan for Class B shares, those expenses may be
carried over and paid in future years. At December 31, 1993, the end of
the Plan year, the Distributor had incurred unreimbursed expenses under
the Plan of $85,104 (equal to 4.70% of the Fund's net assets represented
by Class B shares on that date), which have been carried over into the
present Plan year. If the Plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the asset-based sales
charge to the Distributor for certain expenses it incurred before the Plan
was terminated.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send
money electronically between those accounts to perform a number of types
of account transactions, including purchases of shares by telephone
(either through a service representative or by PhoneLink, described
below), automatic investments under Asset Builder Plans, and sending
dividends and distributions or Automatic Withdrawal Plan payments directly
to your bank account. Please refer to the Application for details or call
the Transfer Agent for more information.
AccountLink privileges must be requested on the Application you use
to buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can
request AccountLink privileges on signature-guaranteed instructions to the
Transfer Agent. AccountLink privileges will apply to each shareholder
listed in the registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent receives
written instructions terminating or changing those privileges. After you
establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the
Transfer Agent signed by all shareholders who own the account.
- Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase shares
in amounts up to $250,000 through a telephone representative, call the
Distributor at 1-800-852-8457. The purchase payment will be debited from
your bank account.
- PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account
transactions automatically using a touch-tone phone. PhoneLink may be used
on already-established Fund accounts after you obtain a Personal
Identification Number (PIN), by calling the special PhoneLink number: 1-
800-533-3310.
- Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund, to pay for
these purchases.
- Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your
Fund account to another OppenheimerFunds account you have already
established by calling the special PhoneLink number. Please refer to "How
to Exchange Shares," below, for details.
- Selling Shares. You can redeem shares by telephone
automatically by calling the PhoneLink number and the Fund will send the
proceeds directly to your AccountLink bank account. Please refer to "How
to Sell Shares," below for details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that
enable you to sell shares automatically or exchange them to another
OppenheimerFunds account on a regular basis:
- Automatic Withdrawal Plans. If your Fund account is $5,000 or
more, you can establish an Automatic Withdrawal Plan to receive payments
of at least $50 on a monthly, quarterly, semi-annual or annual basis. The
checks may be sent to you or sent automatically to your bank account on
AccountLink. You may even set up certain types of withdrawals of up to
$1,500 per month by telephone. You should consult the Application and
Statement of Additional Information for more details.
- Automatic Exchange Plans. You can authorize the Transfer Agent to
exchange an amount you establish in advance automatically for shares of
up to five other OppenheimerFunds on a monthly, quarterly, semi-annual or
annual basis under an Automatic Exchange Plan. The minimum purchase for
each other OppenheimerFunds account is $25. These exchanges are subject
to the terms of the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Fund shares,
you have up to 6 months to reinvest all or part of the redemption proceeds
in Class A shares of the Fund or other OppenheimerFunds without paying
sales charge. This privilege applies to Class A shares that you sell, and
Class B shares on which you paid a contingent deferred sales charge when
you redeemed them. You must be sure to ask the Distributor for this
privilege when you send your payment. Please consult the Statement of
Additional Information for more details.
Retirement Plans. Fund shares are available as an investment for your
retirement plans. If you participate in a plan sponsored by your employer,
the plan trustee or administrator must make the purchase of shares for
your retirement plan account. The Distributor offers a number of different
retirement plans that can be used by individuals and employers:
- Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
- 403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
- SEP-IRAs and SAR-SEPs (Simplified Employee Pension Plans) for
small business owners or people with income from self-employment
- Pension and Profit-Sharing Plans for self-employed persons and
small business owners
Please call the Distributor for the OppenheimerFunds plan documents,
which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account on any regular
business day by selling (redeeming) some or all of your shares. Your
shares will be sold at the next net asset value calculated after your
order is received and accepted by the Transfer Agent. The Fund offers you
a number of ways to sell your shares: in writing, by using the Fund's
Checkwriting privilege or by telephone. You can also set up Automatic
Withdrawal Plans to redeem shares on a regular basis, as described above.
If you have questions about any of these procedures, and especially if you
are redeeming shares in a special situation, such as due to the death of
the owner, or from a retirement plan, please call the Transfer Agent
first, at 1-800-525-7048, for assistance.
- Retirement Accounts. To sell shares in an OppenheimerFunds
retirement account in your name, call the Transfer Agent for a
distribution request form. There are special income tax withholding
requirements for distributions from retirement plans and you must
submit a Withholding form with your request to avoid delay. If your
retirement plan account is held for you by your employer, you must
arrange for the distribution request to be sent by the plan
administrator or trustee. There are additional details in the
Statement of Additional Information.
- Certain Requests Require a Signature Guarantee. To protect you
and the Fund from fraud, certain redemption requests must be in writing
and must include a signature guarantee in the following situations (there
may be other situations also requiring a signature guarantee):
- You wish to redeem more than $50,000 worth of shares and receive
a check
- The check is not payable to all shareholders listed on the account
statement
- The check is not sent to the address of record on your statement
- Shares are being transferred to a Fund account with a different
owner or name
- Shares are redeemed by someone other than the owners (such as an
Executor)
- Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union or
savings association, or from a foreign bank that has a U.S. correspondent
bank, or by a U.S. registered dealer or broker in securities, municipal
securities or government securities, or by a U.S. national securities
exchange, a registered securities association or a clearing agency. If you
are signing as a fiduciary or on behalf of a corporation, partnership or
other business, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
- Your name
- The Fund's name
- Your Fund account number (from your statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling, and
- Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell
shares.
Use the following address for requests by mail:
Oppenheimer Shareholder Services
P.O. Box 5270, Denver, Colorado 80217
Send Courier or Express Mail requests to:
Oppenheimer Shareholder Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price
on a regular business day, your call must be received by the Transfer
Agent by 4:00 P.M. You may not redeem shares held in an OppenheimerFunds
retirement plan or under a share certificate by telephone.
- To redeem shares through a service representative, call 1-800-852-
8457
- To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address
on the account, or, if you have linked your Fund account to your bank
account on AccountLink, you may have the proceeds wired to that account.
- Telephone Redemptions Paid by Check. Up to $50,000 may be
redeemed by telephone, once in each 7-day period. The check must be
payable to all owners of record of the shares and must be sent to the
address on the account. This service is not available within 30 days of
changing the address on an account.
- Telephone Redemptions Through AccountLink. There are no dollar
limits on telephone redemption proceeds sent to a bank account designated
when you establish AccountLink. Normally the ACH wire to your bank is
initiated on the business day after the redemption. You do not receive
dividends on the proceeds of the shares you redeemed while they are
waiting to be wired.
CheckWriting. To be able to write checks against your Fund account, you
may request that privilege on your account Application or you can contact
the Transfer Agent for signature cards, which must be signed (with a
signature guarantee) by all owners of the account and returned to the
Transfer Agent so that checks can be sent to you to use. Shareholders with
joint accounts can elect in writing to have checks paid over the signature
of one owner.
- Checks can be written to the order of whomever you wish, but may
not be cashed at the Fund's bank or custodian.
- Checkwriting privileges are not available for accounts holding
Class B shares or Class A shares that are subject to a contingent deferred
sales charge.
- Checks must be written for at least $100.
- Checks cannot be paid if they are written for more than your
account value.
Remember: your shares fluctuate in value and you should not write
a check close to the total account value.
- You may not write a check that would require the Fund to redeem
shares that were purchased by check or Asset Builder Plan payments within
the prior 15 days.
- Don't use your checks if you changed your Fund account number.
The Fund will charge a $10 fee, which may be deducted from your
account, for any check that is not paid because (1) the owners of the
account told the Fund not to pay the check, or (2) the check was for more
than the account balance, or (3) the check did not have the proper
signatures, (4) or the check was written for less than $100.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
OppenheimerFunds at net asset value per share at the time of exchange,
without sales charge. A $5 service fee will be deducted from the fund
account you are exchanging into to help defray administrative costs. That
charge is waived for automated exchanges between already established
accounts on PhoneLink described below. To exchange shares, you must meet
several conditions:
- Shares of the fund selected for exchange must be available for
sale in your state of residence
- The prospectuses of this Fund and the fund whose shares you want
to buy must offer the exchange privilege
- You must hold the shares you buy when you establish your account
for at least 7 days before you can exchange them; after the
account is open 7 days, you can exchange shares every regular
business day
- You must meet the minimum purchase requirements for the fund you
purchase by exchange
- Before exchanging into a fund, you should obtain and read its
prospectus
Shares of a particular class may be exchanged only for shares of the
same class in the other OppenheimerFunds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present, not all of the OppenheimerFunds offer the same classes of shares.
If a fund has only one class of shares that does not have a class
designation, they are "Class A" shares for exchange purposes. In some
cases, sales charges may be imposed on exchange transactions. Certain
OppenheimerFunds offer Class A shares and either Class B or Class C
shares, and a list can be obtained by calling the Distributor at 1-800-
525-7048. Please refer to "How to Exchange Shares" in the Statement of
Additional Information for more details.
Exchanges may be requested in writing or by telephone:
- Written Exchange Requests. Submit an OppenheimerFunds Exchange
Request form, signed by all owners of the account. Send it to the
Transfer Agent at the addresses listed in "How to Sell Shares."
- Telephone Exchange Requests. Telephone exchange requests may be
made either by calling a service representative at 1-800-852-8457 or by
using PhoneLink for automated exchanges, by calling 1-800-533-3310.
Telephone exchanges may be made only between accounts that are registered
with the same names and address. Shares held under certificates may not
be exchanged by telephone.
You can obtain a list of eligible OppenheimerFunds in the Statement
of Additional Information or by calling the Transfer Agent at 1-800-525-
7048. Exchanges of shares involve a redemption of the shares of the fund
you own and a purchase of shares of the other fund.
There are certain exchange policies you should be aware of:
- Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business
day on which the Transfer Agent receives an exchange request by 4:00
P.M. that is in proper form, but either fund may delay the purchase
of shares of the fund you are exchanging into if it determines it
would be disadvantaged by a same-day transfer of the proceeds to buy
shares. For example, the receipt of multiple exchange requests from
a dealer in a "market-timing" strategy might require the disposition
of securities at a time or price disadvantageous to the Fund.
- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange
request that will disadvantage it, or to refuse multiple exchange
requests submitted by a shareholder or dealer.
- The Fund may amend, suspend or terminate the exchange privilege
at any time. Although the Fund will attempt to provide you notice
whenever it is reasonably able to do so, it may impose these changes
at any time.
- If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
Shareholder Account Rules and Policies
- Net Asset Value Per Share is determined for each class of shares
as of 4:00 P.M. each day The New York Stock Exchange is open by dividing
the value of the Fund's net assets attributable to a class by the number
of shares of that class that are outstanding. The Fund's Board of
Trustees has established procedures to value the Fund's securities to
determine net asset value. In general, securities values are based on
market value. There are special procedures for valuing illiquid and
restricted securities, securities for which market values cannot be
readily obtained, and call options and hedging instruments. These
procedures are described more completely in the Statement of Additional
Information.
- The offering of shares may be suspended during any period in which
the determination of net asset value is suspended, and the offering may
be suspended by the Board of Trustees at any time the Board believes it
is in the Fund's best interest to do so.
- Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any
time. If an account has more than one owner, the Fund and the Transfer
Agent may rely on the instructions of any one owner. Telephone privileges
apply to each owner of the account and the dealer representative of record
for the account unless and until the Transfer Agent receives cancellation
instructions from an owner of the account.
- The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not
use reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise it will not be liable for losses or expenses
arising out of telephone instructions reasonably believed to be genuine.
If you are unable to reach the Transfer Agent during periods of unusual
market activity, you may not be able to complete a telephone transaction
and should consider placing your order by mail.
- Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time
to time, the Transfer Agent in its discretion may waive certain of the
requirements for redemptions stated in this Prospectus.
- Dealers that can perform account transactions for their clients
by participating in NETWORKING through the National Securities Clearing
Corporation are responsible for obtaining their clients' permission to
perform those transactions and are responsible to their clients who are
shareholders of the Fund if the dealer performs any transaction
erroneously.
- The redemption price for shares will vary from day to day because
the value of the securities in the Fund's portfolio fluctuates, and the
redemption price, which is the net asset value per share, will normally
be different for Class A and Class B shares. Therefore, the redemption
value of your shares may be more or less than their original cost.
- Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the shareholder
under the redemption procedures described above) within 7 days after the
Transfer Agent receives redemption instructions in proper form, except
under unusual circumstances determined by the Securities and Exchange
Commission delaying or suspending such payments. The Transfer Agent may
delay forwarding a check or processing a payment via AccountLink for
recently purchased shares, but only until the purchase payment has
cleared. That delay may be as much as 15 days from the date the shares
were purchased. That delay may be avoided if you purchase shares by
certified check or arrange with your bank to provide telephone or written
assurance to the Transfer Agent that your purchase payment has cleared.
- Involuntary redemptions of small accounts may be made by the Fund
if the account value has fallen below $1,000 for reasons other than the
fact that the market value of shares has dropped, and in some cases
involuntary redemptions may be made to repay the Distributor for losses
from the cancellation of share purchase orders.
- Under unusual circumstances shares of the Fund may be redeemed "in
kind," which means that the redemption proceeds will be paid with
securities from the Fund's portfolio. Please refer to the Statement of
Additional Information for more details.
- "Backup Withholding" of Federal income tax may be applied at the
rate of 31% from dividends, distributions and redemption proceeds
(including exchanges) if you fail to furnish the Fund a certified Social
Security or taxpayer identification number when you sign your application,
or if you violate Internal Revenue Service regulations on tax reporting
of dividends.
- The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be
avoided by redeeming your Fund shares directly through the Transfer Agent.
Under the circumstances described in "How To Buy Shares," you may be
subject to a contingent deferred sales charges when redeeming certain
Class A and Class B shares.
- To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report and
updated prospectus to shareholders having the same address on the Fund's
records. However, each shareholder may call the Transfer Agent at 1-800-
525-7048 to ask that copies of those materials be sent personally to that
shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A and Class
B shares from net investment income each regular business day and pays
those dividends to shareholders monthly. Normally, dividends are paid on
the last business day of every month, but the Board of Trustees can change
that date. Distributions may be made monthly from any net short-term
capital gains the Fund realizes in selling securities. It is expected
that distributions paid with respect to Class A shares will generally be
higher than for Class B shares because expenses allocable to Class B
shares will generally be higher.
Capital Gains. The Fund may make distributions annually in December
out of any net short-term or long-term capital gains, and the Fund may
make supplemental distributions of dividends and capital gains following
the end of its fiscal year. Long-term capital gains will be separately
identified in the tax information the Fund sends you after the end of the
year. Short-term capital gains are treated as dividends for tax purposes.
There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are reinvested.
For other accounts, you have four options:
- Reinvest All Distributions in the Fund. You can elect to reinvest
all dividends and long-term capital gains distributions in
additional shares of the Fund.
- Reinvest Capital Gains Only. You can elect to reinvest long-term
capital gains in the Fund while receiving dividends by check or
sent to your bank account on AccountLink.
- Receive All Distributions in Cash. You can elect to receive a
check for all dividends and long-term capital gains distributions
or have them sent to your bank on AccountLink.
- Reinvest Your Distributions in Another OppenheimerFunds Account.
You can reinvest all distributions in another OppenheimerFunds
account you have established.
Taxes. If your account is not a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the
Fund. Long-term capital gains are taxable as long-term capital gains when
distributed to shareholders. Dividends paid from short-term capital gains
and net investment income are taxable as ordinary income. Distributions
are subject to federal income tax and may be subject to state or local
taxes. Your distributions are taxable when paid, whether you reinvest
them in additional shares or take them in cash. Every year the Fund will
send you and the IRS a statement showing the amount of each taxable
distribution you received in the previous year.
- "Buying a Dividend": When a fund goes ex-dividend, its share
price is reduced by the amount of the distribution. If you buy
shares on or just before the ex-dividend date, or just before the
Fund declares a capital gains distribution, you will pay the full
price for the shares and then receive a portion of the price back as
a taxable dividend or capital gain.
- Taxes on Transactions: Share redemptions, including redemptions
for exchanges, are subject to capital gains tax. A capital gain or
loss is the difference between the price you paid for the shares and
the price you received when you sold them.
- Returns of Capital: In certain cases distributions made by the
Fund may be considered a non-taxable return of capital to
shareholders. If that occurs, it will be identified in notices to
shareholders.
This information is only a summary of certain federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax
adviser about the effect of an investment in the Fund on your particular
tax situation.
<PAGE>
Description of Securities Ratings
Description of Standard & Poor's Corporation ("Standard & Poor's") and
Moody's Investors Service, Inc. ("Moody's") bond ratings:
Standard & Poor's describes its four highest ratings for corporate debt
as follows:
AAA: Debt rated "AAA" has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA: Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in a small
degree.
A: Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB: Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal.
Whereas it normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
The ratings from AA to CCC may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
Moody's describes its four highest corporate bond ratings as follows:
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes
and may be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-
range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER INVESTMENT GRADE BOND FUND
Graphic material included in Prospectus of Oppenheimer Investment
Grade Bond Fund: "Comparison of Total Return of Oppenheimer Investment
Grade Bond Fund with The Lehman Brothers Corporate Bond Index - Change in
Value of a $10,000 Hypothetical Investment"
A linear graph will be included in the Prospectus of Oppenheimer
Investment Grade Bond Fund (the "Fund") depicting the initial account
value and subsequent account value of a hypothetical $10,000 investment
in the Fund during each of the Fund's fiscal years since April 15, 1988
to the end of each of the Fund's fiscal years (as to Class A shares) and
since May 1, 1993 (as to Class B shares) and comparing such values with
the same investments over the same time periods with The Lehman Brothers
Corporate Bond Index. Set forth below are the relevant data points that
will appear on the linear graph. Additional information with respect to
the foregoing, including a description of The Lehman Brothers Corporate
Bond Index, is set forth in the Prospectus under "Fund Performance
Information - Management's Discussion of Performance."
Oppenheimer Lehman Brothers
Fiscal Year Investment Grade Corporate
(Period) Ended Bond Fund A Bond Index
- -------------- ----------------- ---------------
4/15/88 $ 9,525 $10,000
12/31/88 9,952 10,368
12/31/89 11,077 11,855
12/31/90 11,602 12,759
12/31/91 13,723 15,170
12/31/92 14,653 16,392
12/31/93 16,163 18,310
Oppenheimer Lehman Brothers
Fiscal Year Investment Grade Corporate
(Period) Ended Bond Fund B Bond Index
- -------------- ----------------- ---------------
05/01/93 $10,000 $10,000
12/31/93 9,891 10,503
- ----------------------
(1) Class B shares of the Fund were first publicly offered on May 1,
1993.
<PAGE>
Oppenheimer Investment Grade Bond Fund
3410 South Galena Street, Denver, CO 80231
Telephone: 1-800-525-7048
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Sub-Adviser Prospectus
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Distributor OPPENHEIMER
Oppenheimer Funds Distributor, Inc. Investment Grade Bond Fund
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities Dated May 1, 1994
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors (OppenheimerFunds Logo)
Deloitte & Touche
1560 Broadway
Denver, Colorado 80202
Legal Counsel
Myer, Swanson & Adams, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, broker, salesperson or any other person has been authorized to
give any information or to make any representations other than those
contained in this Prospectus or the Statement of Additional Information,
and if given or made, such information and representations must not be
relied upon as having been authorized by the Fund, Oppenheimer Management
Corporation, Oppenheimer Funds Distributor, Inc., Massachusetts Mutual
Life Insurance Company, or any affiliate thereof. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of
the securities offered hereby in any state to any person to whom it is
unlawful to make such offer in such state.
PR286 (5/94) * Printed on recycled paper
<PAGE>
Oppenheimer Investment Grade Bond Fund
3410 South Galena Street, Denver, CO 80231
Telephone: 1-800-525-7048
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Sub-Adviser Prospectus and
Massachusetts Mutual Life Insurance Company New Account Application
1295 State Street
Springfield, MA 01111
Distributor OPPENHEIMER
Oppenheimer Funds Distributor, Inc. Investment Grade Bond Fund
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities Dated May 1, 1994
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors (OppenheimerFunds Logo)
Deloitte & Touche
1560 Broadway
Denver, Colorado 80202
Legal Counsel
Myer, Swanson & Adams, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, broker, salesperson or any other person has been authorized to
give any information or to make any representations other than those
contained in this Prospectus or the Statement of Additional Information,
and if given or made, such information and representations must not be
relied upon as having been authorized by the Fund, Oppenheimer Management
Corporation, Oppenheimer Funds Distributor, Inc., Massachusetts Mutual
Life Insurance Company, or any affiliate thereof. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of
the securities offered hereby in any state to any person to whom it is
unlawful to make such offer in such state.
PR285 (5/94) * Printed on recycled paper
<PAGE>
OPPENHEIMER INVESTMENT GRADE BOND FUND
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
Statement of Additional Information dated May 1, 1994.
This Statement of Additional Information of Oppenheimer Investment
Grade Bond Fund is not a Prospectus. This document contains additional
information about the Fund and supplements information in the Prospectus
dated May 1, 1994. It should be read together with the Prospectus which
may be obtained by writing to the Fund's Transfer Agent, Oppenheimer
Shareholder Services, at P.O. Box 5270, Denver, Colorado 80217 or by
calling the Transfer Agent at the toll-free number shown above.
Contents
Page
About the Fund 2
Investment Objective and Policies 2
Other Investment Techniques and Strategies 7
Other Investment Restrictions 14
How the Fund is Managed 15
Organization and History 15
Trustees and Officers of the Fund 16
The Manager and Its Affiliates 19
Brokerage Policies of the Fund 21
Performance of the Fund 23
Distribution and Service Plans 26
About Your Account 29
How to Buy Shares 29
How to Sell Shares 35
How to Exchange Shares 39
Dividends, Capital Gains and Taxes 40
Additional Information About the Fund 43
Description of Securities Ratings 43
Independent Auditors' Report 46
Financial Statements 47
<PAGE>
ABOUT THE FUND
Investment Objective And Policies
Investment Policies and Strategies. The investment objective and
policies of the Fund are discussed in the Prospectus. Set forth below is
supplemental information about those policies and the types of securities
in which the Fund invests, as well as the strategies the Fund may use to
try to achieve its objective. Capitalized terms used in this Statement
of Additional Information have the same meaning as those terms have in the
Prospectus.
All fixed-income securities are subject to two types of risks: credit
risk and interest rate risk. Credit risk relates to the ability of the
issuer to meet interest or principal payments or both as they become due.
Generally, higher yielding bonds are subject to credit risk to a greater
extent than higher quality bonds. Interest rate risk refers to the
fluctuations in value of fixed-income securities resulting solely from the
inverse relationship between price and yield of fixed-income securities.
An increase in interest rates will tend to reduce the market value of
fixed-income investments, and a decline in interest rates will tend to
increase their value. In addition, debt securities with longer
maturities, which tend to produce higher yields, are subject to
potentially greater capital appreciation and depreciation than obligations
with shorter maturities. Fluctuations in the market value of fixed-income
securities subsequent to their acquisition will not affect cash income
from such securities but will be reflected in the net asset values of the
Fund's two classes of shares.
- Investment Risks. All fixed-income securities are subject to two
types of risks: credit risk and interest rate risk. Credit risk relates
to the ability of the issuer to meet interest or principal payments or
both as they become due. Generally, higher yielding bonds are subject to
credit risk to a greater extent than higher quality bonds. Interest rate
risk refers to the fluctuations in value of fixed-income securities
resulting solely from the inverse relationship between price and yield of
outstanding fixed-income securities. An increase in prevailing interest
rates will generally reduce the market value of fixed-income investments,
and a decline in interest rates will tend to increase their value. In
addition, debt securities with longer maturities, which tend to produce
higher yields, are subject to potentially greater capital appreciation and
depreciation than obligations with shorter maturities. Fluctuations in
the market value of fixed-income securities subsequent to their
acquisition will not affect the interest payable on those securities, and
thus the cash income from such securities, but will be reflected in the
valuations of these securities used to compute the Fund's net asset
values.
- Short-Term Debt Securities. The high quality, short-term money
market instruments in which the Fund may invest include U.S. Treasury and
agency obligations; commercial paper (short-term, unsecured, negotiable
promissory notes of a domestic or foreign company) which, at the time of
purchase, are rated in the two highest rating categories for commercial
paper by S&P or Moody's or, if unrated, is issued by companies having an
outstanding debt issue currently rated at least A by S&P or Moody's;
short-term obligations of corporate issuers which are rated in the two
highest rating categories for corporate debt securities by S&P or Moody's
at the date of investment; bank participation certificates provided that
at the date of investment each of the underlying loans is made to an
issuer of securities rated at least A-2, AA or SP-2 by S&P or P-2 or Aa
by Moody's and also provided the underlying loans have a remaining
maturity of one year or less, and certificates of deposit and bankers'
acceptances (time drafts drawn on commercial banks usually in connection
with international transactions) of banks and savings and loan
associations.
Securities of Foreign Governments and Companies. As stated in the
Prospectus, the Fund may invest in debt obligations (which may be
dominated in U.S. dollars or non-U.S. currencies) issued or guaranteed by
foreign corporations, and debt obligations of certain "supranational
entities" (described below) and foreign governments or their agencies or
instrumentalities.
The percentage of the Fund's assets that will be allocated to foreign
securities will vary depending on the relative yields of foreign and U.S.
securities, the economies of foreign countries, the condition of such
countries' financial markets, the interest rate climate of such countries
and the relationship of such countries' currency to the U.S. dollar.
These factors are judged on the basis of fundamental economic criteria
(e.g., relative inflation levels and trends, growth rate forecasts,
balance of payments status, and economic policies) as well as technical
and political data.
Investments in foreign securities offer potential benefits not
available from investments solely in securities of domestic issuers, by
offering the opportunity to invest in foreign issuers that appear to offer
growth potential, or in foreign countries with economic policies or
business cycles different from those of the U.S., or to reduce
fluctuations in portfolio value by taking advantage of foreign bond or
other markets that do not move in a manner parallel to U.S. markets. From
time to time, U.S. government policies have discouraged certain
investments abroad by U.S. investors, through taxation or other
restrictions, and it is possible that such restrictions could be
reimposed.
Securities of foreign issuers that are represented by American
depository receipts, or that are listed on a U.S. securities exchange, or
are traded in the U.S. over-the-counter market are not considered "foreign
securities," because they are not subject to many of the special
considerations and risks (discussed below) that apply to foreign
securities traded and held abroad. If the Fund's portfolio securities are
held abroad, the countries in which such securities may be held and the
sub-custodians holding them must be approved by the Fund's Board of
Trustees under applicable SEC rules.
- Risks of Investing in Foreign Securities. Investment in foreign
securities involves considerations and risks not associated with
investment in securities of U.S. issuers. For example, foreign issuers
are not required to use generally-accepted accounting principles
("G.A.A.P."). If foreign securities are not registered under the
Securities Act of 1933, the issuer does not have to comply with the
disclosure requirements of the Securities Exchange Act of 1934. The
values of foreign securities investments will be affected by incomplete
or inaccurate information available as to foreign issuers, changes in
currency rates, exchange control regulations or currency blockage,
expropriation or nationalization of assets, application of foreign tax
laws (including withholding taxes), changes in governmental administration
or economic or monetary policy in the U.S. or abroad, or changed
circumstances in dealings between nations. In addition, it is generally
more difficult to obtain court judgments outside the United States. Costs
will be incurred in connection with conversions between various
currencies. Foreign brokerage commissions are generally higher than
commissions in the U.S., and foreign securities markets may be less
liquid, more volatile and less subject to governmental regulation than in
the U.S. Investments in foreign countries could be affected by other
factors not generally thought to be present in the U.S., including
expropriation or nationalization, confiscatory taxation and potential
difficulties in enforcing contractual obligations, and could be subject
to extended settlement periods.
The obligations of foreign governmental entities may or may not be
supported by the full faith and credit of a foreign government.
Obligations of "supranational entities" include those of international
organizations designated or supported by governmental entities to promote
economic reconstruction or development and of international banking
institutions and related government agencies. Examples include the
International Bank for Reconstruction and Development (the "World Bank"),
the European Coal and Steel Community, the Asian Development Bank and the
Inter-American Development Bank. The governmental members, or
"stockholders," usually make initial capital contributions to the
supranational entity and in many cases are committed to make additional
capital contributions if the supranational entity is unable to repay its
borrowings. Each supranational entity's lending activities are limited
to a percentage of its total capital (including "callable capital"
contributed by members at the entity's call), reserves and net income.
There is no assurance that foreign governments will be able or willing to
honor their commitments.
Because the Fund may purchase securities denominated in foreign
currencies, a change in the value of any such currency against the U.S.
dollar will result in a change in the U.S. dollar value of the Fund's
assets and its income available for distribution. In addition, although
a portion of the Fund's investment income may be received or realized in
foreign currencies, the Fund will be required to compute and distribute
its income in U.S. dollars, and absorb the cost of currency fluctuations.
The values of foreign investments and the investment income derived
from them may also be affected unfavorably by changes in currency exchange
control regulations. Although the Fund will invest only in securities
denominated in foreign currencies that at the time of investment do not
have significant government-imposed restrictions on conversion into U.S.
dollars, there can be no assurance against subsequent imposition of
currency controls. In addition, the values of foreign securities will
fluctuate in response to a variety of factors, including changes in U.S.
and foreign interest rates.
U.S. Government Securities. U.S. Government Securities are debt
obligations issued or guaranteed by the U.S. Government or one of its
agencies or instrumentalities. The agencies and instrumentalities that
issue U.S. Government Securities include, among others specifically
mentioned: Federal Land Banks, the Farmers Home Administration, the
Central Bank for Cooperatives, Federal Intermediate Credit Banks, Federal
Home Loan Banks, Federal Farm Credit Banks and the U.S. Maritime
Administration. The U.S. Government Securities the Fund can invest in are
described in the Prospectus and include U.S. Treasury securities such as
"zero coupon" Treasury securities and mortgage-backed securities and CMOs.
- Mortgage-Backed U.S. Government Securities and CMOs. These
securities represent participation interests in pools of residential
mortgage loans made by lenders such as banks and savings and loan
associations. The pools are assembled for sale to investors (such as the
Fund) by government agencies, which issue or guarantee the securities
relating to the pool. Such securities differ from conventional debt
securities which generally provide for periodic payment of interest in
fixed or determinable amounts (usually semi-annually) with principal
payments at maturity or specified call dates. Some mortgage-backed U.S.
Government securities in which the Fund may invest may be backed by the
full faith and credit of the U.S. Treasury (e.g., direct pass-through
certificates of Government National Mortgage Association); some are
supported by the right of the issuer to borrow from the U.S. Government
(e.g., obligations of Federal Home Loan Mortgage Corporation); and some
are backed by only the credit of the issuer itself (e.g., Federal National
Mortgage Association). Those guarantees do not extend to the value or
yield of the mortgage-backed securities themselves or to the net asset
value of the Fund's shares.
The yield on mortgage-backed securities is based on the average
expected life of the underlying pool of mortgage loans. The actual life
of any particular pool will be shortened by any unscheduled or early
payments of principal and interest. Principal prepayments generally
result from the sale of the underlying property or the refinancing or
foreclosure of underlying mortgages. The occurrence of prepayments is
affected by a wide range of economic, demographic and social factors and,
accordingly, it is not possible to predict accurately the average life of
a particular pool. Yield on such pools is usually computed by using the
historical record of prepayments for that pool, or, in the case of newly-
issued mortgages, the prepayment history of similar pools. The actual
prepayment experience of a pool of mortgage loans may cause the yield
realized by the Fund to differ from the yield calculated on the basis of
the expected average life of the pool.
Prepayments tend to increase during periods of falling interest
rates, while during periods of rising interest rates prepayments will most
likely decline. When prevailing interest rates rise, the value of a pass-
through security may decrease as do the values of other debt securities,
but, when prevailing interest rates decline, the value of a pass-through
security is not likely to rise to the extent that the values of other debt
securities rise, because of the prepayment feature of pass-through
securities. The Fund's reinvestment of scheduled principal payments and
unscheduled prepayments it receives may occur at times when available
investments offer higher or lower rates than the original investment, thus
affecting the yield of the Fund. Monthly interest payments received by
the Fund have a compounding effect which may increase the yield to the
Fund more than debt obligations that pay interest semi-annually. Because
of those factors, mortgage-backed securities may be less effective than
Treasury bonds of similar maturity at maintaining yields during periods
of declining interest rates. The Fund may purchase mortgage-backed
securities at a premium or at a discount. Accelerated prepayments
adversely affect yields for pass-through securities purchased at a premium
(i.e., at a price in excess of their principal amount) and may involve
additional risk of loss of principal because the premium may not have been
fully amortized at the time the obligation is repaid. The opposite is
true for pass-through securities purchased at a discount.
- GNMA Certificates. Certificates of Government National Mortgage
Association ("GNMA") are mortgage-backed securities of GNMA that evidence
an undivided interest in a pool or pools of mortgages ("GNMA
Certificates"). The GNMA Certificates that the Fund may purchase are of
the "modified pass-through" type, which entitle the holder to receive
timely payment of all interest and principal payments due on the mortgage
pool, net of fees paid to the "issuer" and GNMA, regardless of whether the
mortgagor actually makes the payments when due.
The National Housing Act authorizes GNMA to guarantee the timely
payment of principal and interest on securities backed by a pool of
mortgages insured by the Federal Housing Administration ("FHA") or
guaranteed by the Veterans Administration ("VA"). The GNMA guarantee is
backed by the full faith and credit of the U.S. Government. GNMA is also
empowered to borrow without limitation from the U.S. Treasury if necessary
to make any payments required under its guarantee.
The average life of a GNMA Certificate is likely to be substantially
shorter than the original maturity of the mortgages underlying the
securities. Prepayments of principal by mortgagors and mortgage
foreclosures will usually result in the return of the greater part of
principal investment long before the maturity of the mortgages in the
pool. Foreclosures impose no risk to principal investment because of the
GNMA guarantee, except to the extent that the Fund has purchased the
certificates at a premium in the secondary market.
- FNMA Securities. The Federal National Mortgage Association
("FNMA") was established to create a secondary market in mortgages insured
by the FHA. FNMA issues guaranteed mortgage pass-through certificates
("FNMA Certificates"). FNMA Certificates resemble GNMA Certificates in
that each FNMA Certificate represents a pro rata share of all interest and
principal payments made and owed on the underlying pool. FNMA guarantees
timely payment of interest and principal on FNMA Certificates. The FNMA
guarantee is not backed by the full faith and credit of the U.S.
Government.
- FHLMC Securities. The Federal Home Loan Mortgage Corporation
("FHLMC") was created to promote development of a nationwide secondary
market for conventional residential mortgages. FHLMC issues two types of
mortgage pass-through securities ("FHLMC Certificates"): mortgage
participation certificates ("PCs") and guaranteed mortgage certificates
("GMCs"). PCs resemble GNMA Certificates in that each PC represents a pro
rata share of all interest and principal payments made and owed on the
underlying pool. FHMLC guarantees timely monthly payment of interest on
Pcs and the ultimate payment of principal.
GMCs also represent a pro rata interest in a pool of mortgages.
However, these instruments pay interest semi-annually and return principal
once a year in guaranteed minimum payments. The expected average life of
these securities is approximately ten years. The FHLMC guarantee is not
backed by the full faith and credit of the U.S. Government.
- Collateralized Mortgage-Backed Obligations ("CMOs"). CMOs are
fully-collateralized bonds that are the general obligations of the issuer
thereof, either the U.S. Government, a U.S. Government instrumentality,
or a private issuer. Such bonds generally are secured by an assignment
to a trustee (under the indenture pursuant to which the bonds are issued)
of collateral consisting of a pool of mortgages. Payments with respect
to the underlying mortgages generally are made to the trustee under the
indenture. Payments of principal and interest on the underlying mortgages
are not passed through to the holders of the CMOs as such (i.e., the
character of payments of principal and interest is not passed through, and
therefore payments to holders of CMOs attributable to interest paid and
principal repaid on the underlying mortgages do not necessarily constitute
income and return of capital, respectively, to such holders), but such
payments are dedicated to payment of interest on and repayment of
principal of the CMOs. CMOs often are issued in two or more classes with
different characteristics such as varying maturities and stated rates of
interest. Because interest and principal payments on the underlying
mortgages are not passed through to holders of CMOs, CMOs of varying
maturities may be secured by the same pool of mortgages, the payments on
which are used to pay interest on each class and to retire successive
maturities in sequence. Unlike other mortgage-backed securities
(discussed above), CMOs are designed to be retired as the underlying
mortgages are repaid. In the event of prepayment on such mortgages, the
class of CMO first to mature generally will be paid down. Therefore,
although in most cases the issuer of CMOs will not supply additional
collateral in the event of such prepayment, there will be sufficient
collateral to secure CMOs that remain outstanding.
- Asset-Backed Securities. The value of an asset-backed security
is affected by changes in the market's perception of the asset backing the
security, the creditworthiness of the servicing agent for the loan pool,
the originator of the loans, or the financial institution providing any
credit enhancement, and is also affected if any credit enhancement has
been exhausted. The risks of investing in asset-backed securities are
ultimately dependent upon payment of consumer loans by the individual
borrowers. As a purchaser of an asset-backed security, the Fund would
generally have no recourse to the entity that originated the loans in the
event of default by a borrower. The underlying loans are subject to
prepayments, which shorten the weighted average life of asset-backed
securities and may lower their return, in the same manner as described
above for the prepayments of a pool of mortgage loans underlying mortgage-
backed securities.
Other Investment Techniques And Strategies
Options on Securities. Special risks are associated with options that are
not traded on exchanges (i.e., those that are traded over-the-counter).
Closing transactions in over-the-counter options are effected directly
with a particular broker-dealer, rather than with an anonymous third party
on an exchange. Unlike closing transactions effected on an exchange, a
closing transaction of an over-the- counter option will not actually
extinguish the original option unless both the original option transaction
and the closing transaction are effected with the same broker-dealer.
Therefore, in an over-the-counter option transaction, the Fund bears the
risk that the broker-dealer effecting the closing transaction will fail
to meet its obligations. Also, in some circumstances, the Fund may not
be able to close an over-the-counter option. The Fund might then have to
exercise the option, and bear transaction costs on the exercise, to
realize any benefit from the option. If the Fund writes an over-the-
counter call option that it cannot close, it will have to retain the
underlying security until the option expires or is exercised. This would
limit the Fund's ability to realize a gain or avoid a loss if the value
of the underlying security changes while the option is still outstanding.
Also, over-the-counter options are not subject to the protections afforded
by the Options Clearing Corporation to purchasers of exchange-traded
options.
The staff of the Division of Investment Management of the Securities
and Exchange Commission (the "SEC") has taken the position that the
premiums that a fund pays for the purchase of over-the-counter options,
and the value of securities used to cover over-the-counter options written
by a fund, are illiquid securities. Accordingly, the Fund intends to
enter into over-the-counter options transactions only with primary dealers
in U.S. Government Securities and only pursuant to agreements that will
assure that the Fund will at all times have the right to repurchase the
option written by it from the dealer at a specified formula price.
The Fund will treat the amount by which such formula price exceeds
the intrinsic value of the option (i.e., the amount, if any, by which the
market price of the underlying security exceeds the exercise price of the
option) as an illiquid investment. It is the present policy of the Trust
not to enter into any over-the-counter option transaction if, as a result,
more than 15% of its net assets would be invested in (i) illiquid
investments (determined under the foregoing formula) relating to such
over-the-counter options written by the Fund, (ii) such over-the-counter
options purchased by the Fund, (iii) securities which are not readily
marketable, and (iv) repurchase agreements maturing in more than seven
days.
The Trustees have adopted a non-fundamental policy that the Fund may
write covered call options or write covered put options with respect to
not more than 5% of the value of its net assets. Similarly, the Fund may
only purchase call options and put options with a value of up to 5% of its
net assets.
The purpose in writing covered options is to realize greater income
than would be realized on portfolio securities transactions alone. The
writing of options involves certain risks. During the option period, the
covered call writer has, in return for the premium on the option, given
up the opportunity to profit from a price increase in the underlying
securities above the exercise price, but, as long as its obligation as a
writer continues, has retained the risk of loss should the price of the
underlying security decline. A covered put writer assumes the risk that
the market price for the underlying security will fall below the exercise
price, in which case the writer could be required to purchase the security
at a higher price than the then current market price of the security. In
both cases, the writer has no control over the time when it may be
required to fulfill its obligation as a writer of the option. Once an
option writer has received an exercise notice, it cannot effect a closing
purchase transaction in order to terminate its obligation under the option
and must deliver or purchase the underlying securities at the exercise
price. A fund may forego the benefits of appreciation on securities sold
pursuant to call options or pay a higher price for securities acquired
pursuant to put options.
Futures Contracts and Options on Futures Contracts. While futures will
be traded to reduce certain risks, futures trading itself entails certain
other risks. One risk arises due to the imperfect correlation between
movements in the price of the futures contracts and movements in the price
of the securities which are the subject of such contracts. In addition,
the market price of futures contracts may be affected by certain factors,
such as the closing out of futures contracts by investors through
offsetting transactions in order to avoid margin deposit and maintenance
requirements, and the participation of speculators in the futures market.
Another risk is that there may not be a liquid secondary market for a
given futures contract or at a given time, and in such event it may not
be possible for the Fund to close a futures position. Finally, successful
use of futures contracts by the Fund is subject to the ability of the
Fund's sub-adviser, Massachusetts Mutual Life Insurance Company
("MassMutual"), to predict correctly movements in the direction of
interest rates and other factors affecting markets for securities. Thus,
while the Fund may benefit from the use of such
contracts, the operation of these risk factors may result in a poorer
overall performance than if it had not entered into any futures contracts.
Positions taken in the futures markets are not normally held to
maturity, but are instead liquidated through offsetting transactions which
may result in a profit or a loss. While futures positions taken by the
Fund will usually be liquidated in this manner, the Fund may instead make
or take delivery of the underlying securities whenever it appears
economically advantageous to do so.
- Interest Rate Swap Transactions. Swap agreements entail both
interest rate risk and credit risk. There is a risk that, based on
movements of interest rates in the future, the payments made by the Fund
under a swap agreement will have been greater than those received by it.
Credit risk arises from the possibility that the counterparty will
default. If the counterparty to an interest rate swap defaults, the
Fund's loss will consist of the net amount of contractual interest
payments that the Fund has not yet received. The Manager will monitor the
creditworthiness of counterparties to the Fund's interest rate swap
transactions on an ongoing basis. The Fund will enter into swap
transactions with appropriate counterparties pursuant to master netting
agreements. A master netting agreement provides that all swaps done
between the Fund and the counterparty under the master agreement shall be
regarded as parts of an integral agreement. If on any date amounts are
payable in the same currency in respect of one or more swap transactions,
the net amount payable on that date in that currency shall be paid. In
addition, the master netting agreement may provide that if one party
defaults generally or on one swap, the counterparty may terminate the
swaps with that party. Under such agreements, if there is a default
resulting in a loss to one party, the measure of that party's damages is
calculated by reference to the average cost of a replacement swap with
respect to each swap (i.e., the mark-to-market value at the time of the
termination of each swap). The gains and losses on all swaps are then
netted, and the result is the counterparty's gain or loss on termination.
The termination of all swaps and the netting of gains and losses on
termination is generally referred to as "aggregation."
- Additional Information About Hedging Instruments and Their Use.
The Fund's Custodian, or a securities depository acting for the Custodian,
will act as the Fund's escrow agent, through the facilities of the Options
Clearing Corporation ("OCC"), as to the investments on which the Fund has
written options traded on exchanges or as to other acceptable escrow
securities, so that no margin will be required for such transactions. OCC
will release the securities on the expiration of the option or upon the
Fund's entering into a closing transaction. An option position may be
closed out only on a market which provides secondary trading for options
of the same series, and there is no assurance that a liquid secondary
market will exist for any particular option.
When the Fund writes an over-the-counter ("OTC") option, it will
enter into an arrangement with a primary U.S. Government securities
dealer, which would establish a formula price at which the Fund would have
the absolute right to repurchase that OTC option. That formula price
would generally be based on a multiple of the premium received for the
option, plus the amount by which the option is exercisable below the
market price of the underlying security (that is, the extent to which the
option "is in-the-money"). When the Fund writes an OTC option, it will
treat as illiquid (for purposes of the limit on its assets that may be
invested in illiquid securities, stated in the Prospectus) the mark-to-
market value of any OTC option held by it. The Securities and Exchange
Commission ("SEC") is evaluating whether OTC options should be considered
liquid securities, and the procedure described above could be affected by
the outcome of that evaluation.
- Regulatory Aspects of Hedging Instruments. The Fund must operate
within certain restrictions as to its long and short positions in Futures
and options thereon under a rule (the "CFTC Rule") adopted by the
Commodity Futures Trading Commission (the "CFTC") under the Commodity
Exchange Act (the "CEA"), which excludes the Fund from registration with
the CFTC as a "commodity pool operator" (as defined under the CEA) if the
Fund complies with the CFTC Rule. Under these restrictions the Fund will
not, as to any positions, whether short, long or a combination thereof,
enter into Futures and options thereon for which the aggregate initial
margins and premiums exceed 5% of the fair market value of its total
assets, with certain exclusions as defined in the CFTC Rule. Under the
restrictions, the Fund also must, as to its short positions, use Futures
and options thereon solely for bona-fide hedging purposes within the
meaning and intent of the applicable provisions of the CEA.
Transactions in options by the Fund are subject to limitations
established by each of the exchanges governing the maximum number of
options which may be written or held by a single investor or group of
investors acting in concert, regardless of whether the options were
written or purchased on the same or different exchanges or are held in one
or more accounts or through one or more different exchanges or through one
or more brokers. Thus, the number of options which the Fund may write or
hold may be affected by options written or held by other entities,
including other investment companies having the same or an affiliated
investment adviser. Position limits also apply to Futures. An exchange
may order the liquidation of positions found to be in violation of those
limits and may impose certain other sanctions. Due to requirements under
the Investment Company Act, when the Fund purchases a Future, the Fund
will maintain, in a segregated account or accounts with its Custodian,
cash or readily-marketable, short-term (maturing in one year or less) debt
instruments in an amount equal to the market value of the securities
underlying such Future, less the margin deposit applicable to it.
- Tax Aspects of Covered Calls and Hedging Instruments. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code. That qualification enables the Fund to "pass through" its
income and realized capital gains to shareholders without the Fund having
to pay tax on them. This avoids a "double tax" on that income and capital
gains, since shareholders will be taxed on the dividends and capital gains
they received from the Fund. One of the tests for the Fund's
qualification is that less than 30% of its gross income (irrespective of
losses) must be derived from gains realized on the sale of securities held
for less than three months. To comply with that 30% cap, the Fund will
limit the extent to which it engages in the following activities, but will
not be precluded from them: (i) selling investments, including Futures,
held for less than three months, whether or not they were purchased on the
exercise of a call held by the Fund; (ii) purchasing calls or puts which
expire in less than three months; (iii) effecting closing transactions
with respect to calls or puts written or purchased less than three months
previously; (iv) exercising puts or calls held by the Fund for less than
three months; or (v) writing calls on investments held for less than three
months.
Certain foreign currency exchange contracts ("Forward Contracts") in
which the Fund may invest are treated as "section 1256 contracts." Gains
or losses relating to section 1256 contracts generally are characterized
under the Internal Revenue Code as 60% long-term and 40% short-term
capital gains or losses. However, foreign currency gains or losses
arising from certain section 1256 contracts (including Forward Contracts)
generally are treated as ordinary income or loss. In addition, section
1256 contracts held by the Fund at the end of each taxable year are
"marked-to-market" with the result that unrealized gains or losses are
treated as through they were realized. These contracts also may be
marked-to-market for purposes of the excise tax applicable to investment
company distributions and for other purposes under rules prescribed
pursuant to the Internal Revenue Code. An election can be made by the
Fund to exempt these transactions from this mark-to-market treatment.
Certain Forward Contracts entered into by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a position
making up a straddle is allowed only to the extent such loss exceeds any
unrecognized gain in the offsetting positions making up the straddle.
Disallowed loss is generally allowed at the point where there is
no unrecognized gain in the offsetting positions making up the straddle,
or the offsetting position is disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuation in exchange rates that occur between the time the Fund accrues
interest or other receivables or accrues expenses or other liabilities
denominated in a foreign currency and the time the Fund actually collects
such receivables or pays such liabilities generally are treated as
ordinary income or ordinary loss. Similarly, on disposition of debt
securities denominated in a foreign currency and on disposition of foreign
currency forward contracts, gains or losses attributable to fluctuations
in the value of a foreign currency between the date of acquisition of the
securities or contract and the date of disposition are also treated as
ordinary gain or loss. Currency gains and losses are offset against
market gains and losses before determining a net "Section 988" gain or
loss under the Internal Revenue Code, which may increase or decrease the
amount of the Fund's investment company income available for distribution
to its shareholders.
- Risks of Hedging With Options and Futures. In addition to the
risks with respect to hedging discussed in the Prospectus and above, there
is a risk in using short hedging by selling Futures to attempt to protect
against decline in value of the Fund's portfolio securities (due to an
increase in interest rates) that the prices of such Futures will correlate
imperfectly with the behavior of the cash (i.e., market value) prices of
the Fund's securities. The ordinary spreads between prices in the cash
and futures markets are subject to distortions due to differences in the
natures of those markets. First, all participants in the futures markets
are subject to margin deposit and maintenance requirements. Rather than
meeting additional margin deposit requirements, investors may close out
futures contracts through offsetting transactions which could distort the
normal relationship between the cash and futures markets. Second, the
liquidity of the futures markets depends on participants entering into
offsetting transactions rather than making or taking delivery. To the
extent participants decide to make or take delivery, liquidity in the
futures markets could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures
markets are less onerous than margin requirements in the securities
markets. Therefore, increased participation by speculators in the futures
markets may cause temporary price distortions.
If the Fund uses Hedging Instruments to establish a position in the
debt securities markets as a temporary substitute for the purchase of
individual debt securities (long hedging) by buying Futures and/or calls
on such Futures or on debt securities, it is possible that the market may
decline; if the Fund then concludes not to invest in such securities at
that time because of concerns as to possible further market decline or for
other reasons, the Fund will realize a loss on the Hedging Instruments
that is not offset by a reduction in the price of the debt securities
purchased.
- Repurchase Agreements. The Fund may acquire securities that are
subject to repurchase agreements, in order to generate income while
providing liquidity. In a repurchase transaction, the Fund acquires a
security from, and simultaneously resells it to, an approved vendor (a
U.S. commercial bank, U.S. branch of a foreign bank or a broker-dealer
which has been designated a primary dealer in government securities, which
must meet the credit requirements set by the Trust's Board of Trustees
from time to time), for delivery on an agreed upon future date. The sale
price exceeds the purchase price by an amount that reflects an agreed-upon
interest rate effective for the period during which the repurchase
agreement is in effect. The majority of these transactions run from day
to day, and delivery pursuant to resale typically will occur within one
to five days of the purchase. Repurchase agreements are considered
"loans" under the Investment Company Act, collateralized by the underlying
security. The Fund's repurchase agreements will require that at all times
while the repurchase agreement is in effect, the collateral's value must
equal or exceed the repurchase price to collateralize the repayment
obligation. Additionally, the Manager will impose creditworthiness
requirements to confirm that the vendor is financially sound. If the
vendor of a repurchase agreement fails to pay the agreed-upon resale price
on the delivery date, the Fund's risks in such event may include any costs
of disposing of the collateral, and any loss from any delay in foreclosing
on the collateral. Additionally, the Sub-Adviser will monitor the
creditworthiness of the vendor.
- Illiquid and Restricted Securities. The Fund will not purchase
or otherwise acquire any security if, as a result, more than 10% of its
net assets (taken at current value) would be invested in securities that
are illiquid by virtue of the absence of a readily available market or
because of legal or contractual restrictions on resale ("restricted
securities"). As noted in the prospectus, that amount may, in the future,
increase to 15%. This policy applies to participation interests, bank
time deposits, master demand notes, repurchase transactions having a
maturity beyond seven days, over-the-counter options held by the Fund and
that portion of assets used to cover such options. This policy is not a
fundamental policy and does not limit purchases of restricted securities
that are eligible for sale to qualified institutional purchasers pursuant
to Rule 144A under the Securities Act of 1933, provided that those
securities have been determined to be liquid by the Board of Trustees of
the Fund or by the Manager under Board-approved guidelines. Those
guidelines take into account the trading activity for such securities and
the availability of reliable pricing information, among other factors.
If there is a lack of trading interest in a particular Rule 144A security,
the Fund's holding of that security may be deemed to be illiquid. There
may be undesirable delays in selling illiquid securities at prices
representing their fair value. The expenses of registration of restricted
securities that are subject to legal restrictions on resale (excluding
securities that may be resold by the Fund pursuant to Rule 144A) may be
negotiated at the time such securities are purchased by the Fund. When
registration is required, a considerable period may elapse between a
decision to sell the securities and the time the Fund would be permitted
to sell them. Thus, the Fund might not be able to obtain as favorable a
price as that prevailing at the time of the decision to sell. The Fund
also may acquire, through private placements, securities having
contractual resale restrictions, which might lower the amount realizable
upon the sale of such securities.
- Loans of Portfolio Securities. The Fund may lend its portfolio
securities (other than in repurchase transactions) to brokers, dealers and
other financial institutions subject to the restrictions stated in the
Prospectus. Under applicable regulatory requirements (which are subject
to change), the loan collateral, on each business day must, at least equal
the market value of the loaned securities and must consist of cash, bank
letters of credit, U.S. Government Securities, or other cash equivalents
in which the Fund is permitted to invest. To be acceptable as collateral,
letters of credit must obligate a bank to pay amounts demanded by the Fund
if the demand meets the terms of the letter. Such terms and the issuing
bank must be satisfactory to the Fund. In a portfolio securities lending
transaction, the Fund receives from the borrower an amount equal to the
interest paid or the dividends declared on the loaned securities during
the term of the loan as well as the interest on the collateral securities,
less any finders' or administrative fees the Fund pays in arranging the
loan. The Fund may share the interest it receives on the collateral
securities with the borrower as long as it realizes at least a minimum
amount of interest required by the lending guidelines established by its
Board of Trustees. In connection with securities lending, the Fund might
experience risks of delay in receiving additional collateral, or risks of
delay in recovery of the securities, or loss of rights in the collateral
should the borrower fail financially. The Fund will not lend its
portfolio securities to any officer, trustee, employee or affiliate of
the Trust, its Manager or Sub-Adviser. The terms of the Fund's loans must
meet certain tests under the Internal Revenue Code and permit the Fund to
reacquire loaned securities on five business days' notice or in time to
vote on any important matter.
- "When-Issued" and Delayed Delivery Transactions. The Fund may
purchase securities on a "when-issued" basis, and may purchase or sell
such securities on a "delayed delivery" basis. Although the Fund will
enter into such transactions for the purpose of acquiring securities for
its portfolio or for delivery pursuant to options contracts it has entered
into, the Fund may dispose of a commitment prior to settlement. "When-
issued" or "delayed delivery" refers to securities whose terms and
indenture are available and for which a market exists, but which are not
available for immediate delivery. When such transactions are negotiated,
the price (which is generally expressed in yield terms) is fixed at the
time the commitment is made, but delivery and payment for the securities
take place at a later date. The Fund does not intend to make such
purchases for speculative purposes. Such securities may bear interest at
a lower rate than longer-term securities. The commitment to purchase a
security for which payment will be made on a future date may be deemed a
separate security and involve a risk of loss if the value of the security
declines prior to the settlement date. During the period between
commitment by the Fund and settlement (generally within two months but not
to exceed 120 days), no payment is made for the securities purchased by
the purchaser, and no interest accrues to the purchaser from the
transaction. Such securities are subject to market fluctuation; the value
at delivery may be less than the purchase price. The Fund will maintain
a segregated account with its Custodian, consisting of cash, U.S.
Government securities or other high grade debt obligations at least equal
to the value of purchase commitments until payment is made.
The Fund will engage in when-issued transactions in order to secure
what is considered to be an advantageous price and yield at the time of
entering into the obligation. When the Fund engages in when-issued or
delayed delivery transactions, it relies on the buyer or seller, as the
case may be, to consummate the transaction. Failure of the buyer or
seller to do so may result in the Fund losing the opportunity to obtain
a price and yield considered to be advantageous. At the time the Fund
makes a commitment to purchase or sell a security on a when-issued or
forward commitment basis, it records the transaction and reflects the
value of the security purchased, or if a sale, the proceeds to be
received, in determining its net asset value. If the Fund chooses to (i)
dispose of the right to acquire a when-issued security prior to its
acquisition or (ii) dispose of its right to deliver or receive against a
forward commitment, it may incur a gain or loss.
To the extent the Fund engages in when-issued and delayed delivery
transactions, it will do so for the purpose of acquiring or selling
securities consistent with its investment objective and policies and not
for the purposes of investment leverage. The Fund enters into such
transactions only with the intention of actually receiving or delivering
the securities, although (as noted above), when-issued securities and
forward commitments may be sold prior to settlement date. In addition,
changes in interest rates before settlement in a direction other than that
expected by the Manager will affect the value of such securities and may
cause a loss to the Fund.
When-issued transactions and forward commitments allow the Fund a
technique to use against anticipated changes in interest rates and prices.
For instance, in periods of rising interest rates and falling prices, the
Fund might sell securities in its portfolio on a forward commitment basis
to attempt to limit its exposure to anticipated falling prices. In
periods of falling interest rates and rising prices, the Fund might sell
portfolio securities and purchase the same or similar securities on a
when-issued or forward commitment basis, thereby obtaining the benefit of
currently higher cash yields.
Other Investment Restrictions
The Fund's significant investment restrictions are set forth in the
Prospectus. There are additional investment restrictions that the Fund
must follow that are also fundamental policies. Fundamental policies and
the Fund's investment objective, cannot be changed without the vote of a
"majority" of the Fund's outstanding voting securities. Under the
Investment Company Act, such a "majority" vote is defined as the vote of
the holders of the lesser of (i) 67% or more of the shares present or
represented by proxy at a shareholder meeting, if the holders of more than
50% of the outstanding shares are present, or (ii) more than 50% of the
outstanding shares.
Under these additional restrictions, the Trust may not, on behalf of
the Fund: (1) act as an underwriter, except to the extent that, in
connection with the disposition of portfolio securities, the Fund may be
deemed an underwriter under applicable laws; (2) invest in oil, gas or
other mineral leases, rights, royalty contracts or exploration or
development programs, real estate or real estate mortgage loans (this
restriction does not prevent the Fund from purchasing securities secured
or issued by companies investing or dealing in real estate and by
companies that are not principally engaged in the business of buying and
selling such leases, rights, contracts or programs); (3) purchase
commodities or commodity contracts except futures contracts, including but
not limited to contracts for the future delivery of securities and futures
contracts based on securities indexes; (4) make loans other than by
investing in obligations in which the Fund may invest consistent with its
investment objective and policies and other than repurchase agreements and
loans of portfolio securities; (5) pledge, mortgage or hypothecate its
assets, except that, to secure permitted borrowings, it may pledge
securities having a market value at the time of the pledge not exceeding
15% of the cost of the Fund's total assets and except in connection with
permitted transactions in options, futures contracts and options on
futures contracts, and except for reverse repurchase agreements and
securities lending; (6) purchase or retain securities of any issuer if,
to the knowledge of the Trust, more than 5% of such issuer's securities
are beneficially owned by officers and trustees of the Trust or officers
and directors of Massachusetts Mutual Life Insurance Company
("MassMutual") who individually beneficially own more than 1/2 of 1% of
the securities of such issuer; and (7) make loans to an officer, trustee
or employee of the Trust or to any officer, director or employee of
MassMutual, or to MassMutual.
In addition to the investment restrictions described above and those
contained in the Prospectus, the Trustees of the Trust have voluntarily
adopted certain policies and restrictions which are observed in the
conduct of the affairs of the Fund. These represent intentions of the
Trustees based upon current circumstances. They differ from fundamental
investment policies in that the following additional investment
restrictions may be changed or amended by action of the Trustees without
requiring prior notice to or approval of shareholders. In accordance with
such nonfundamental policies and guidelines, the Fund may not: (1) invest
for the purpose of exercising control over, or management of, any company;
(2) purchase any security of a company which (including any predecessor,
controlling person, general partner and guarantor) has a record of less
than three years of continuous operations or relevant business experience,
if such purchase would cause more than 5% of the current value of the
Fund's assets to be invested in such companies; and (3) invest in
securities of other investment companies, except by purchase in the open
market where no commission or profit to a sponsor or dealer results from
such purchase other than the customary broker's commission, except when
such purchase is part of a plan of merger, consolidation, reorganization
or acquisition.
How the Fund is Managed
Organization and History. The Fund is one of two series of Oppenheimer
Integrity Funds (the "Trust"). This Statement of Additional Information
may be used with the Fund's Prospectus only to offer shares of the Fund.
The Trust was established in 1982 as MassMutual Liquid Assets Trust and
changed its name to MassMutual Integrity Funds on April 15, 1988. The
Fund was reorganized from a closed-end investment company known as
MassMutual Income Investors, Inc. into a series of the Trust on April 15,
1988. On March 29, 1991, the Trust changed its name from MassMutual
Integrity Funds to Oppenheimer Integrity Funds and the Fund changed its
name from MassMutual Investment Grade Bond Fund to Oppenheimer Investment
Grade Bond Fund. Shares of the Fund represent an interest in the Fund
proportionately equal to the interest of each other share of the same
class and entitle the holder to one vote per share (and a fractional vote
for a fractional share) on matters submitted to their vote at
shareholders' meetings. Shareholders of the Fund and of the Trust's other
series vote together in the aggregate on certain matters at shareholders'
meetings, such as the election of Trustees and ratification of appointment
of auditors for the Trust. Shareholders of a particular series or class
vote separately on proposals which affect that series or class, and
shareholders of a series or class which is not affected by that matter are
not entitled to vote on the proposal. For example, only shareholders of
a series, such as the Fund, vote exclusively on any material amendment to
the investment advisory agreement with respect to the series. Only
shareholders of a class of a series vote on certain amendments to the
Distribution and/or Service Plans if the amendments affect that class.
The Trustees are authorized to create new series and classes of
series. The Trustees may reclassify unissued shares of the Trust or its
series or classes into additional series or classes of shares. The
Trustees may also divide or combine the shares of a class into a greater
or lesser number of shares without thereby changing the proportionate
beneficial interest of a shareholder in the Fund. Shares do not have
cumulative voting rights or preemptive or subscription rights. Shares may
be voted in person or by proxy.
As a Massachusetts business Trust, the Trust is not required to hold,
and does not plan to hold, regular annual meetings of shareholders. The
Trust will hold meetings when required to do so by the Investment Company
Act or other applicable law, or when a shareholder meeting is called by
the Trustees or upon proper request of the shareholders. Shareholders
have the right, upon the declaration in writing or vote of two-thirds of
the outstanding shares of the Trust, to remove a Trustee. The Trustees
will call a meeting of shareholders to vote on the removal of a Trustee
upon the written request of the record holders of at least 10% of its
outstanding shares. In addition, if the Trustees receive a request from
at least 10 shareholders (who have been shareholders for at least six
months) holding shares of the Trust valued at $25,000 or more or holding
at least 1% of the Trust's outstanding shares, whichever is less, stating
that they wish to communicate with other shareholders to request a meeting
to remove a Trustee, the Trustees will then either make the Trust's
shareholder list available to the applicants or mail their communication
to all other shareholders at the applicant's expense, or the Trustees may
take such other action as set forth under Section 16(c) of the Investment
Company Act.
The Trust's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Trust's obligations, and provides
for indemnification and reimbursement of expenses out of its property for
any shareholder held personally liable for its obligations. The
Declaration of Trust also provides that the Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act
or obligation of the Fund and satisfy any judgment thereon. Thus, while
Massachusetts law permits a shareholder of a business trust (such as the
Trust) to be held personally liable as a "partner" under certain
circumstances, the risk of a Trust shareholder incurring financial loss
on account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any
shareholder of the Trust, agrees under the Trust's Declaration of Trust
to look solely to the assets of the Trust for satisfaction of any claim
or demand which may arise out of any dealings with the Trust, and the
Trustees shall have no personal liability to any such person, to the
extent permitted by law.
Trustees And Officers
The Trust's Trustees and officers and their principal occupations and
business affiliations during the past five years are listed below. All
of the Trustees are also trustees, directors or managing general partners
of Oppenheimer Total Return Fund, Inc., Oppenheimer Equity Income Fund,
Oppenheimer High Yield Fund, Oppenheimer Cash Reserves, Oppenheimer Tax-
Exempt Cash Reserves, Oppenheimer Tax-Exempt Bond Fund, Oppenheimer
Limited-Term Government Fund, The New York Tax-Exempt Income Fund, Inc.,
Oppenheimer Champion High Yield Fund, Oppenheimer Main Street Funds, Inc.,
Oppenheimer Strategic Funds Trust, Oppenheimer Strategic Income & Growth
Fund, Oppenheimer Strategic Investment Grade Bond Fund, Oppenheimer
Strategic Short-Term Income Fund and Oppenheimer Variable Account Funds;
as well as the following "Centennial Funds": Daily Cash Accumulation
Fund, Inc., Centennial America Fund, L.P., Centennial Money Market Trust,
Centennial Government Trust, Centennial New York Tax Exempt Trust,
Centennial Tax Exempt Trust and Centennial California Tax Exempt Trust,
(all of the foregoing funds are collectively referred to as the "Denver
OppenheimerFunds"). Mr. Fossel is President and Mr. Swain is Chairman of
the Denver OppenheimerFunds. As of March 29, 1994,
the Trustees and officers of the Fund as a group owned less than 1% of the
Fund's outstanding shares.
Robert G. Avis, Trustee
One North Jefferson Ave., St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G.
Edwards, Inc. (its parent holding company); Chairman of A.G.E. Asset
Management and A.G. Edwards Trust Company (its affiliated investment
adviser and trust company, respectively).
William A. Baker, Trustee
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Trustee
5301 Bolsa Avenue, Huntington Beach, California 92647
Vice President of McDonnell Douglas Ltd.; formerly associated with the
National Aeronautics and Space Administration.
Jon S. Fossel, President and Trustee*
Two World Trade Center, New York, New York 10048-0203
Chairman, Chief Executive Officer and a director of the Manager; President
and a director of Oppenheimer Acquisition Corp. ("OAC"), the Manager's
parent holding company; President and a director of HarbourView Asset
Management Corporation ("HarbourView"), a subsidiary of the Manager; a
director of Shareholder Services, Inc. ("SSI") and Shareholder Financial
Services, Inc. ("SFSI"), transfer agent subsidiaries of the Manager;
formerly President of the Manager.
Raymond J. Kalinowski, Trustee
44 Portland Drive, St. Louis, Missouri 63131
Formerly Vice Chairman and a director of A.G. Edwards, Inc., parent
holding company of A.G. Edwards & Sons, Inc. (a broker-dealer), of which
he was a Senior Vice President.
C. Howard Kast, Trustee
2552 East Alameda, Denver, Colorado 80209
Formerly the Managing Partner of Deloitte, Haskins & Sells (an accounting
firm).
Robert M. Kirchner, Trustee
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Ned M. Steel, Trustee
3416 S. Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; formerly Senior Vice
President and a director ofVan Gilder Insurance Corp. (insurance brokers).
James C. Swain, Chairman and Trustee*
3410 South Galena Street, Denver, Colorado 80231
Vice Chairman of the Manager; President and Director of Centennial Asset
Management Corporation, an investment adviser subsidiary of the Manager
("Centennial"); formerly President and Director of Oppenheimer Asset
Management Corporation ("OAMC"), an investment adviser which was a
subsidiary of the Manager, and Chairman of the Board of SSI.
Andrew J. Donohue, Vice President
Executive Vice President and General Counsel of Oppenheimer Management
Corporation ("OMC") (the "Manager") and Oppenheimer Funds Distributor,
Inc. (the "Distributor"); an officer of other OppenheimerFunds; formerly
Senior Vice President and Associate General Counsel of the Manager and the
Distributor; Partner in, Kraft & McManimon (a law firm); an officer of
First Investors Corporation (a broker-dealer) and First Investors
Management Company, Inc. (broker-dealer and investment adviser); director
and an officer of First Investors Family of Funds and First Investors Life
Insurance Company.
George C. Bowen, Vice President, Secretary and Treasurer
3410 South Galena Street Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President and
Treasurer of the Distributor and HarbourView; Senior Vice President,
Treasurer, Assistant Secretary and a director of Centennial; Vice
President, Treasurer and Secretary of SSI and SFSI; an officer of other
OppenheimerFunds; formerly Senior Vice President/Comptroller and Secretary
of OAMC.
Mary E. Wilson, Vice President and Portfolio Manager
Vice President and Managing Director of the Sub-Advisor; Senior Vice
President of MML Series Investment Fund; and Vice President of MassMutual
Participation Investors and MassMutual Corporate Investors.
Robert G. Zack, Assistant Secretary
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate General Counsel of the Manager,
Assistant Secretary of SSI and SFSI; an officer of other OppenheimerFunds.
Robert Bishop, Assistant Treasurer
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an officer
of other OppenheimerFunds; previously a Fund Controller of the Manager,
prior to which he was an Accountant for Resolution Trust Corporation and
previously an Accountant and Commissions Supervisor for Stuart James
Company Inc., a broker-dealer.
Scott Farrar, Assistant Treasurer
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an officer
of other OppenheimerFunds; previously a Fund Controller for the Manager,
prior to which he was an International Mutual Fund Supervisor for Brown
Brothers Harriman & Co., a bank, and previously a Senior Fund Accountant
for State Street Bank & Trust Company, before which he was a sales
representative for Central Colorado Planning.
__________________
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
- Remuneration of Trustees. The officers of the Trust are
affiliated with the Manager; they and the Trustees of the Fund who are
affiliated with the Manager (Mr. Swain and Mr. Fossel who is both an
officer and Trustee) and receive no salary or fee from the Trust. During
the Fund's fiscal year ended December 31, 1993, the remuneration
(including expense reimbursements) paid to all Trustees of the Trust
(excluding Mr. Fossel and Mr. Swain) as a group for services as Trustees
and as members of one or more committees of the Board totaled $6,398.
- Major Shareholders. As of March 29, 1994, the only entity that
owned of record or was known by the Fund to own beneficially 5% or more
of any class of the Fund's outstanding shares was MML Reinsurance LTD,
1295 State Street, Springfield, Massachusetts 01111, which owned
722,909.450 Class A shares (7.16%) of the Fund, and which represented less
than 5% of the outstanding shares of the Trust.
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled by
Massachusetts Mutual Life Insurance Company. OAC is also owned in part
by certain of the Manager's directors and officers, some of whom also
serve as officers of the Trust, and two of whom (Mr. Jon S. Fossel and Mr.
James C. Swain) serve as Trustees of the Trust.
- The Investment Advisory Agreement. The investment advisory
agreement, dated as of March 28, 1991, between the Trust on behalf of the
Fund and the Manager requires the Manager, at its expense, to provide the
Fund with adequate office space, facilities and equipment, and to provide
and supervise the activities of all administrative and clerical personnel
required to provide effective corporate administration for the Fund,
including the compilation and maintenance of records with respect to its
operations, the preparation and filing of specified reports, and
composition of proxy materials and registration statements for continuous
public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the advisory
agreement or by the Distributor under the Distribution Agreement are paid
by the Fund. The advisory agreement lists examples of expenses paid by
the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, fees to certain Trustees, legal and audit expenses,
custodian and transfer agent expenses, share issuance costs, certain
printing and registration costs and non-recurring expenses, including
litigation costs.
The advisory agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence in the performance of its
duties or reckless disregard for its obligations and duties under the
advisory agreement, the Manager is not liable for any loss resulting from
a good faith error or omission on its part with respect to any of its
duties thereunder. The advisory agreement permits the Manager to act as
investment adviser for any other person, firm or corporation and to use
the name "Oppenheimer" in connection with other investment companies for
which it may act as investment adviser or general distributor. If the
Manager shall no longer act as investment adviser to the Fund, the right
of the Fund to use the name "Oppenheimer" as part of its name may be
withdrawn.
MassMutual serves as investment sub-adviser to the Fund pursuant
to a sub-advisory agreement between MassMutual and OMC dated as of March
28, 1991. Under the sub-advisory agreement, MassMutual is responsible for
managing the Fund's portfolio of securities and making investment
decisions with respect to the Fund's investments, subject to the Fund's
investment policies established by the Board of Trustees of the Trust, and
in accordance with the Fund's investment objective, policies and
restrictions, set forth in the Prospectus and in this Statement of
Additional Information. The Sub-Adviser's fee is paid by the Manager.
The sub-advisory agreement has the same provisions as to renewal,
termination and the standard of care as the investment advisory agreement,
and both advisory agreements are subject to annual approval by the
Trustees, who may terminate either advisory agreement on sixty days'
notice approved by a majority of the Trustees.
The advisory agreements contain no expense limitation. However,
independently of the advisory agreements, the Manager has undertaken that
the total expenses of the Fund in any fiscal year (including the
management fee, but excluding taxes, interest, brokerage fees,
distribution plan payments, and extraordinary expenses, such as litigation
costs) shall not exceed (and the Manager undertakes to reduce the Fund's
management fee in the amount by which such expenses shall exceed) the most
stringent applicable state "blue sky" expense limitation requirement for
qualification of sale of the Fund's shares. At present, that limitation
is imposed by California and limits expenses (with specified exclusions)
to 2.5% of the first $30 million of the Fund's average annual net assets,
2.0% of the next $70 million of average net assets and 1.5% of average net
assets in excess of $100 million. The Manager reserves the right to
change or eliminate this expense limitation at any time. The payment of
the management fee at the end of any month will be reduced so that at no
time will there be any accrued but unpaid liability under the above
expense limitation.
Prior to March 28, 1991, the Sub-Adviser was the Fund's investment
adviser, and MML Investors Services, Inc. ("MMLISI"), a wholly-owned
subsidiary of MassMutual (and therefore an affiliate of an affiliate of
the Fund), was the Distributor of shares of the Fund. For the fiscal
years ended December 31, 1991, the advisory fees paid to MassMutual for
the period from January 1, 1991 to March 27, 1991 under the previous
investment advisory agreement was $75,574, and the advisory fees paid to
the Manager under the Agreement was $266,278 (net of a $21,414
reimbursement by the Sub-Adviser), of which $142,541 was paid by the
Manager to MassMutual pursuant to the sub-advisory agreement. For the
fiscal year ended December 31, 1992, the advisory fees paid to the Manager
was $491,642, of which $342,743 was paid by the Manager to the Sub-
Adviser. For the fiscal year ended December 31, 1993, the advisory fees
paid to the Manager was $555,430, of which $380,790 was paid by the
Manager to the Sub-Adviser.
- The Distributor. Under the General Distributor's Agreement between
the Trust and the Distributor, the Distributor acts as the Fund's
principal underwriter in the continuous public offering of the Fund's
Class A and Class B shares, but is not obligated to sell a specific number
of shares. Expenses normally attributable to sales (other than those paid
under the Class B Distribution and Service Plan), including advertising
and the cost of printing and mailing prospectuses (other than those
furnished to existing shareholders), are borne by the Distributor. During
the Fund's fiscal years ended December 31, 1991, 1992 and 1993, the
aggregate amount of sales charges on sales of the Fund's Class A shares
was $100,682, $337,554 and $269,639, respectively, of which the
Distributor and MMLISI retained in the aggregate $73,003, $213,717 and
$163,271 in those respective years. From May 1, 1993 (commencement of
offering of Class B shares) to December 31, 1993, the Distributor advanced
$79,173 to broker-dealers on the sales of the Funds' Class B shares,
$9,318 of which went to MMLISI. In addition, the Distributor collected
$350 from contingent deferred sales charges assessed on Class B shares.
- The Transfer Agent. Oppenheimer Shareholder Services, the Fund's
tranfer agent, is responsible for maintaining the Fund's shareholder
registry and shareholder accounting records, and for shareholder servicing
and administrative functions.
Brokerage Policies Of The Fund
Brokerage Provisions of the Investment Advisory and Sub-Advisory
Agreements. One of the duties of the Sub-Adviser under the sub-advisory
agreement is to arrange the portfolio transactions of the Fund. In doing
so, the Sub-Adviser is authorized by the sub-advisory agreement to employ
broker-dealers ("brokers"), including "affiliated" brokers, as that term
is defined in the Investment Company Act, as may, in its best judgment
based on all relevant factors, implement the policy of the Fund to
obtain, at reasonable expense, the "best execution" (prompt and reliable
execution at the most favorable price obtainable) of such transactions.
The Sub-Adviser need not seek competitive commission bidding or base its
selection on "posted" rates, but is expected to be aware of the current
rates of eligible brokers and to minimize the commissions paid to the
extent consistent with the provisions of the sub-advisory agreement and
the interests and policies of the Fund as established by the Trust's Board
of Trustees.
Under the sub-advisory agreement, the Sub-Adviser is authorized
to select brokers which provide brokerage and/or research services for the
Fund and/or the other accounts over which it or its affiliates have
investment discretion. The commissions paid to such brokers may be higher
than another qualified broker would have charged, if a good faith
determination is made by the Sub-Adviser that the commission is reasonable
in relation to the services provided. Most purchases made by the Fund are
principal transactions at net prices, and the Fund incurs little or no
brokerage costs. During the fiscal year ended December 31, 1991, 1992 and
1993, no brokerage commissions were paid by the Fund.
Description of Brokerage Practices Followed by the Manager. Subject
to the provisions of the advisory agreement, the procedures and rules
described above, allocations of brokerage are made by portfolio managers
under the supervision of the Manager's executive officers and the Sub-
Adviser. Transactions in securities other than those for which an
exchange is the primary market are generally done with principals or
market makers. Brokerage commissions are paid primarily for effecting
transactions in listed securities and otherwise only if it appears likely
that a better price or execution can be obtained. When the Fund engages
in an option transaction, ordinarily the same broker will be used for the
purchase or sale of the option and any transactions in the securities to
which the option relates. Option commissions may be relatively higher
than those which would apply to direct purchases and sales of portfolio
securities. The Sub-Adviser shall select broker-dealers to effect the
Fund's portfolio transactions on the basis of its estimate of their
ability to obtain best execution of particular and related portfolio
transactions. The abilities of a broker-dealer to obtain best execution
of particular portfolio transaction(s) will be judged by the Sub-Adviser
on the basis of all relevant factors and considerations.
The research services provided by a particular broker may be
useful only to one or more of the advisory accounts of the Sub-Adviser and
its affiliates, and investment research received for the commissions of
those other accounts may be useful both to the Fund and one or more of
such other accounts. Such research, which may be supplied by a third
party at the instance of a broker, includes information and analyses on
particular companies and industries as well as market or economic trends
and portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Sub-Adviser in a
non-research capacity (such as bookkeeping or other administrative
functions), then only the percentage or component that provides assistance
to the Sub-Adviser in the investment decision-making process may be paid
for in commission dollars. The Board of Trustees has permitted the
Manager to use concessions on fixed price offerings to obtain research,
in the same manner as is permitted for agency transactions.
The research services provided by brokers broaden the scope and
supplement the research activities of the Sub-Adviser by making available
additional views for consideration and comparisons, and enabling the Sub-
Adviser to obtain market information for the valuation of securities held
in the Fund's portfolio or being considered for purchase. The Board,
including the independent Trustees of the Trust (those Trustees of the
Trust who are not "interested persons," as defined in the Investment
Company Act, and who have no direct or indirect financial interest in the
operation of the advisory agreements or Distribution Plans described
below), annually reviews information furnished by the Sub-Adviser as to
the commissions paid to brokers furnishing such services so that the Board
may ascertain whether the amount of such commissions was reasonably
related to the value or benefit of such services.
Securities held by the Fund may also be held by Sub-Adviser in its
investment accounts and by other investment companies for which it acts
as investment adviser. If the same security is purchased or sold for the
Fund and such investment accounts or companies at or about the same time,
such purchases or sales normally will be combined, to the extent
practicable, and will be allocated as nearly as practicable on a pro rata
basis in proportion to the amounts to be purchased and sold. The main
factors to be considered will be the investment objectives of the
respective portfolios, the relative size of portfolio holdings of the same
or comparable security, availability of cash for investment by the various
portfolios and the size of their respective investment commitments. It
is believed that the ability of the Fund to participate in larger volume
transactions will, in most cases, produce better execution for the Fund.
In some cases, however, this procedure could have a detrimental effect on
the price and amount of a security available to the Fund or the price at
which a security may be sold. It is the opinion of the Trust's management
that such execution advantage and the desirability of retaining the Sub-
Adviser in that capacity outweigh the disadvantages, if any, which might
result from this procedure.
Performance of the Fund
Yield and Total Return Information. As described in the Prospectus,
from time to time the "standardized yield," "dividend yield," "average
annual total return", "total return," and "total return at net asset
value" of an investment in a class of the Fund may be advertised. An
explanation of how yields and total returns are calculated for each class
and the components of those calculations is set forth below.
The Fund's advertisement of its performance must, under applicable
rules of the Securities and Exchange Commission, include the average
annual total returns for each class of shares of the Fund for the 1, 5 and
10-year periods (or the life of the class, if less) as of the most
recently ended calendar quarter prior to the publication of the
advertisement. This enables an investor to compare the Fund's performance
to the performance of other funds for the same periods. However, a number
of factors should be considered before using such information as a basis
for comparison with other investments. An investment in the Fund is not
insured; its yields and returns and share prices are not guaranteed and
normally will fluctuate on a daily basis. When redeemed, an investor's
shares may be worth more or less than their original cost. Yields and
returns for any given past period are not a prediction or representation
by the Fund of future yields or rates of return on its shares. The yields
and returns of Class A and Class B shares of the Fund are affected by
portfolio quality, the type of investments the Fund holds and its
operating expenses allocated to a particular class.
- Standardized Yields. The Fund's "yield" (referred to as
"standardized yield") for a given 30-day period for a class of shares is
calculated using the following formula set forth in rules adopted by the
Securities and Exchange Commission that apply to all funds that quote
yields:
a-b 6
Standardized Yield = 2 ((------ + 1) - 1)
cd
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
reimbursements).
c = the average daily number of shares of that class
outstanding during the 30-day period that were entitled to
receive dividends.
d = the maximum offering price per share of the class on the
last day of the period, adjusted for undistributed net
investment income.
The standardized yield of a class of shares for a 30-day period
may differ from its yield for any other period. The SEC formula assumes
that the standardized yield for a 30-day period occurs at a constant rate
for a six-month period and is annualized at the end of the six-month
period. This standardized yield is not based on actual distributions paid
by the Fund to shareholders in the 30-day period, but is a hypothetical
yield based upon the net investment income from the Fund's portfolio
investments calculated for that period. The standardized yield may differ
from the "dividend yield" of that class, described below. Additionally,
because each class of shares is subject to different expenses, it is
likely that the standardized yields of the Fund's classes of shares will
differ. For the 30-day period ended December 31, 1993, the standardized
yields for the Fund's Class A and Class B shares were 6.03% and 5.52%,
respectively.
- Dividend Yield and Distribution Return. From time to time the
Fund may quote a "dividend yield" or a "distribution return" for each
class. Dividend yield is based on the Class A or Class B share dividends
derived from net investment income during a stated period. Distribution
return includes dividends derived from net investment income and from
realized capital gains declared during a stated period. Under those
calculations, the dividends and/or distributions for that class declared
during a stated period of one year or less (for example, 30 days) are
added together, and the sum is divided by the maximum offering price per
share of that class) on the last day of the period. When the result is
annualized for a period of less than one year, the "dividend yield" is
calculated as follows:
Dividend Yield of the Class =
Dividends of the Class
- ----------------------------------------------------
Max Offering Price of the Class (last day of period)
Divided by number of days (accrual period) x 365
The maximum offering price for Class A shares includes the maximum
front-end sales charge. For Class B shares, the maximum offering price
is the net asset value per share, without considering the effect of
contingent deferred sales charges.
From time to time similar yield or distribution return
calculations may also be made using the Class A net asset value (instead
of its respective maximum offering price) at the end of the period. The
dividend yields on Class A shares for the 30-day period ended December 31,
1993, were 5.43% and 5.70% when calculated at maximum offering price and
at net asset value, respectively. The dividend yield on Class B shares
for the 30-day period ended December 31, 1993, was 4.93% when calculated
at net asset value.
- Average Annual Total Returns. The "average annual total
return" of each class is an average annual compounded rate of return for
each year in a specified number of years. It is the rate of return based
on the change in value of a hypothetical initial investment of $1,000 ("P"
in the formula below) held for a number of years ("n") to achieve an
Ending Redeemable Value ("ERV"), according to the following formula:
( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )
- Cumulative Total Returns. The cumulative "total return"
calculation measures the change in value of a hypothetical investment of
$1,000 over an entire period of years. Its calculation uses some of the
same factors as average annual total return, but it does not average the
rate of return on an annual basis. Cumulative total return is determined
as follows:
ERV - P = Cumulative Total Return
-------
P
In calculating total returns for Class A shares, the current
maximum sales charge of 4.75% (as a percentage of the offering price) is
deducted from the initial investment ("P") (unless the return is shown at
net asset value, as discussed below). For Class B shares, the payment of
the applicable contingent deferred sales charge (5.0% for the first year,
4.0% for the second year, 3.0% for the third and fourth years, 2.0% in the
fifth year, 1.0% in the sixth year and none thereafter) is applied to the
investment result for the time period shown (unless the total return is
shown at net asset value, as described below). Total returns also assume
that all dividends and capital gains distributions during the period are
reinvested to buy additional shares at net asset value per share, and that
the investment is redeemed at the end of the period. The "average annual
total returns" on an investment in Class A shares of the Fund for the one
year period ended December 31, 1993 and for the period from April 15, 1988
(the date the Fund became an open-end Fund) to December 31, 1993, were
5.06% and 8.77%, respectively. The cumulative "total return" on Class A
shares for the latter period was 61.63%. For the fiscal period from May
1, 1993, through December 31, 1993, the average annual total return and
the cumulative total return on an investment in Class B shares of the Fund
were -1.64% and -1.09%, respectively.
- Total Returns at Net Asset Value. From time to time the Fund
may also quote an "average annual total return at net asset value" or a
cumulative "total return at net asset value" for Class A or Class B
shares. Each is based on the difference in net asset value per share at
the beginning and the end of the period for a hypothetical investment in
that class of shares (without considering front-end or contingent sales
charges) and takes into consideration the reinvestment of dividends and
capital gains distributions. The cumulative total returns at net asset
value on the Fund's Class A shares for the fiscal year ended December 31,
1993, and for the period from April 15, 1988 to December 31, 1993 were
10.30% and 69.69%, respectively. The cumulative total return at net asset
value on the Fund's Class B shares for the fiscal period from May 1, 1993
through December 31, 1993 was 3.91%.
Other Performance Comparisons. From time to time the Fund may publish
the ranking of its Class A or Class B shares by Lipper Analytical
Services, Inc. ("Lipper"), a widely-recognized independent mutual fund
monitoring service. Lipper monitors the performance of regulated
investment companies, including the Fund, and ranks their performance for
various periods based on categories relating to investment objectives.
The performance of the Fund's classes is ranked against (i) all other
funds, excluding money market funds, and (ii) all other general bond
funds. The Lipper performance rankings are based on total return that
includes the reinvestment of capital gains distributions and income
dividends but does not take sales charges or taxes into consideration.
The Fund's performance may also be compared to the performance of the
Lipper General Bond Fund Index, which is a net asset value weighted index
of general bond funds compiled by Lipper. It is calculated with
adjustments for income dividends and capital gains distributions as of the
ex-dividend date.
From time to time the Fund may publish the ranking of the
performance of its Class A or Class B shares by Morningstar, Inc., an
independent mutual fund monitoring service that ranks mutual funds,
including the Fund, in broad investment categories (equity, taxable bond,
tax-exempt and other) monthly, based upon each fund's three, five and ten-
year average annual total returns (when available) and a risk adjustment
factor that reflects Fund performance relative to three-month U.S.
Treasury bill monthly returns. Such returns are adjusted for fees and
sales loads. There are five ranking categories with a corresponding
number of stars: highest (5), above average (4), neutral (3), below
average (2) and lowest (1). Ten percent of the funds, series or classes
in an investment category receive 5 stars, 22.5% receive 4 stars, 35%
receive 3 stars, 22.5% receive 2 stars, and the bottom 10% receive one
star. Morningstar ranks the Class A and Class B shares of the Fund in
relation to other taxable bond funds.
The total return on an investment made in Class A or Class B
shares of the Fund may be compared with the performance for the same
period of the Consumer Price Index, the Salomon Brothers World Government
Bond Fund Index, the Salomon Brothers High Grade Corporate Bond Index, the
Shearson Lehman Government/Corporate Bond Index and the J.P. Morgan
Government Bond Index. The Consumer Price Index is generally considered
to be a measure of inflation. The Salomon Brothers World Government Bond
Index generally represents the performance of government debt securities
of various markets throughout the world, including the United States. The
Salomon Brothers High Grade Corporate Bond Index generally represents the
performance of high grade long-term corporate bonds, and the Shearson
Lehman Government/Corporate Bond Index generally represents the
performance of intermediate and long-term government and investment grade
corporate debt securities. The J.P. Morgan Government Bond Index
generally represents the performance of government bonds issued by various
countries including the United States. The foregoing bond indices are
unmanaged indices of securities that do not reflect reinvestment of
capital gains or take investment costs into consideration, as these items
are not applicable to indices.
From time to time the Fund may also include in its advertisements
and sales literature performance information about the Fund or rankings
of the Fund's performance cited in newspapers or periodicals, such as The
New York Times. These articles may include quotations of performance from
other sources, such as Lipper or Morningstar.
When comparing yield, total return and investment risk of an
investment in Class A or Class B shares of the Fund with other
investments, investors should understand that certain other investments
have different risk characteristics than an investment in shares of the
Fund. For example, certificates of deposit may have fixed rates of return
and may be insured as to principal and interest by the FDIC, while the
Fund's returns will fluctuate and its share values and returns are not
guaranteed. Money market accounts offered by banks also may be insured
by the FDIC and may offer stability of principal. U.S. Treasury
securities are guaranteed as to principal and interest by the full faith
and credit of the U.S. government. Money market mutual funds may seek to
offer a fixed price per share.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A Shares and a
Distribution and Service Plan for Class B shares of the Fund under Rule
12b-1 of the Investment Company Act, pursuant to which the Fund will
reimburse the Distributor for all or a portion of its costs incurred in
connection with the distribution and/or servicing of the shares of that
class, as described in the Prospectus. Each Plan has been approved by a
vote of (i) the Board of Trustees of the Fund, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose
of voting on that Plan, and (ii) the holders of a "majority" (as defined
in the Investment Company Act) of the shares of each class (for the
Distribution and Service Plan for the Class B shares, that vote was cast
by the Manager as the then-sole initial holder of Class B shares of the
Fund).
In addition, under the Plans, the Manager and the Distributor, in
their sole discretion, from time to time may use their own resources
(which, in the case of the Manager, may include profits from the advisory
fee it receives from the Fund) to make payments to brokers, dealers or
other financial institutions (each is referred to as a "Recipient" under
the Plans) for distribution and administrative services they perform. The
Distributor and the Manager may, in their sole discretion, increase or
decrease the amount of payments they make to Recipients from their own
resources.
Unless terminated as described below, each Plan continues in
effect from year to year but only as long as such continuance is
specifically approved at least annually by the Fund's Board of Trustees
and its Independent Trustees by a vote cast in person at a meeting called
for the purpose of voting on such continuance. Either Plan may be
terminated at any time by the vote of a majority of the Independent
Trustees or by the vote of the holders of a "majority" (as defined in the
Investment Company Act) of the outstanding shares of that class. Neither
Plan may be amended to increase materially the amount of payments to be
made unless such amendment is approved by shareholders of the class
affected by the amendment. All material amendments must be approved by
the Independent Trustees.
While the Plans are in effect, the Treasurer of the Trust shall
provide separate written reports to the Trust's Board of Trustees at least
quarterly on the amount of all payments made pursuant to each Plan, the
purpose for which the payment was made and the identity of each Recipient
that received any such payment. The report for the Class B Plan shall
also include the distribution costs for that quarter, and such costs for
previous fiscal periods that are carried forward, as explained in the
Prospectus and below. Those reports, including the allocations on which
they are based, will be subject to the review and approval of the
Independent Trustees in the exercise of their fiduciary duty. Each Plan
further provides that while it is in effect, the selection and nomination
of those Trustees of the Trust who are not "interested persons" of the
Trust is committed to the discretion of the Independent Trustees. This
does not prevent the involvement of others in such selection and
nomination if the final decision on any such selection or nomination is
approved by a majority of the Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by the
Recipient for itself and its customers did not exceed a minimum amount,
if any, that may be determined from time to time by a majority of the
Fund's Independent Trustees. Initially, the Board of Trustees has set the
fee at the maximum rate and set no minimum amount.
For the fiscal year ended December 31, 1993, payments under the
Class A Plan totaled $279,190, all of which was paid by the Distributor
to Recipients, including $181,032 paid to MMLISI.
Any unreimbursed expenses incurred with respect to Class A shares
for any fiscal quarter by the Distributor may not be recovered under the
Class A Plan in subsequent fiscal quarters. Payments received by the
Distributor under the Plan for Class A shares will not be used to pay any
interest expense, carrying charges, or other financial costs, or
allocation of overhead by the Distributor.
The Class B Plan allows the service fee payment to be paid by the
Distributor to Recipients in advance for the first year Class B shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. Service fee payments by the Distributor to Recipients will
be made (i) in advance for the first year Class B shares are outstanding,
following the purchase of shares, in an amount equal to 0.25% of the net
asset value of the shares purchased by the Recipient or its customers and
(ii) thereafter, on a quarterly basis, computed as of the close of
business each day at an annual rate of 0.25% of the average daily net
asset value of Class B shares held in accounts of the Recipient or its
customers. An exchange of shares does not entitle the Recipient to an
advance payment of the service fee. In the event Class B shares are
redeemed during the first year such shares are outstanding, the Recipient
will be obligated to repay a pro rata portion of the advance of the
service fee payment to the Distributor.
Although the Class B Plan permits the Distributor to retain both
the asset-based sales charges and the service fee on Class B shares, or
to pay Recipients the service fee on a quarterly basis, without payment
in advance, the Distributor presently intends to pay the service fee to
Recipients in the manner described above. A minimum holding period may
be established from time to time under the Class B Plan by the Board.
Initially, the Board has set no minimum holding period. All payments
under the Class B Plan become subject to the limitations imposed by the
Rules of Fair Practice of the National Association of Securities Dealers,
Inc. on payments of asset-based sales charges and service fees. The
Distributor anticipates that it will take a number of years for it to
recoup (from the Fund's payments to the Distributor under the Class B Plan
and recoveries of the CDSC) the sales commissions paid to authorized
brokers or dealers. For the Fiscal period from May 1, 1993 through
December 31, 1993, payments under the Class B plan totaled $6,089.
Asset-based sales charge payments are designed to permit an
investor to purchase shares of the Fund without the assessment of a front-
end sales load and at the same time permit the Distributor to compensate
brokers and dealers in connection with the sale of Class B shares of the
Fund. The Distributor's actual distribution expenses for any given year
may exceed the aggregate of payments received pursuant to the Class B Plan
and from contingent deferred sales charges, and such expenses will be
carried forward and paid in future years. The Fund will be charged only
for interest expenses, carrying charges or other financial costs that are
directly related to the carry-forward of actual distribution expenses.
For example, if the Distributor incurred distribution expenses of $4
million in a given fiscal year, of which $2,000,000 was recovered in the
form of contingent deferred sales charges paid by investors and $1,600,000
were reimbursed in the form of payments made by the Fund to the
Distributor under the Class B Plan, the balance of $400,000 (plus
interest) would be subject to recovery in future fiscal years from such
sources.
The Class B Plan allows for the carry-forward of distribution
expenses, to be recovered from asset-based sales charges in subsequent
fiscal periods, as described in the Prospectus. The asset-based sales
charge paid to the Distributor by the Fund under the Class B Plan is
intended to allow the Distributor to recoup the cost of sales commissions
paid to authorized brokers and dealers at the time of sale, plus financing
costs, as described in the Prospectus. Such payments may also be used to
pay for the following expenses in connection with the distribution of
Class B shares: (i) financing the advance of the service fee payment to
Recipients under the Class B Plan, (ii) compensation and expenses of
personnel employed by the Distributor to support distribution of Class B
shares, and (iii) costs of sales literature, advertising and prospectuses
(other than those furnished to current shareholders) and state "blue sky"
registration fees.
About Your Account
How To Buy Shares
Alternative Sales Arrangements - Class A and Class B Shares. The
Alternative Sales Arrangements permit an investor to choose the method of
purchasing shares that is more beneficial to the investor depending on the
amount of the purchase, the length of time the investor expects to hold
shares and other relevant circumstances. Investors should understand that
the purpose and function of the deferred sales charge and asset-based
sales charge with respect to Class B shares are the same as those of the
initial sales charge with respect to Class A shares. Any salesperson or
other person entitled to receive compensation for selling Fund shares may
receive different compensation with respect to one class of shares than
the other. The Distributor will not accept any order for $1 million or
more of Class B shares on behalf of a single investor (not including
dealer "street name" or omnibus accounts) because generally it will be
more advantageous for that investor to purchase Class A shares of the Fund
instead.
The two classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class
B shares and the dividends payable on Class B shares will be reduced by
incremental expenses borne solely by that class, including the asset-based
sales charge to which Class B shares are subject.
The conversion of Matured Class B shares to Class A shares is
subject to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or tax adviser, to the
effect that the conversion of Matured Class B shares does not constitute
a taxable event for the holder under Federal income tax law. If such a
revenue ruling or opinion is no longer available, the automatic conversion
feature may be suspended, in which event no further conversions of Matured
Class B shares would occur while such suspension remained in effect.
Although Matured Class B shares could then be exchanged for Class A shares
on the basis of relative net asset value of the two classes, without the
imposition of a sales charge or fee, such exchange could constitute a
taxable event for the holder, and absent such exchange, Class B shares
might continue to be subject to the asset-based sales charge for longer
than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A and Class B shares recognizes two
types of expenses. General expenses that do not pertain specifically to
either class are allocated pro rata to the shares of each class, based on
the percentage of the net assets of such class to the Fund's total net
assets, and then equally to each outstanding share within a given class.
Such general expenses include (i) management fees, (ii) legal, bookkeeping
and audit fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Additional Statements and other materials for current
shareholders, (iv) fees to unaffiliated Trustees, (v) custodian expenses,
(vi) share issuance costs, (vii) organization and start-up costs, (viii)
interest, taxes and brokerage commissions, and (ix) non-recurring
expenses, such as litigation costs. Other expenses that are directly
attributable to a class are allocated equally to each outstanding share
within that class. Such expenses include (i) Distribution and Service
Plan fees, (ii) incremental transfer and shareholder servicing agent fees
and expenses, (iii) registration fees and (iv) shareholder meeting
expenses, to the extent that such expenses pertain to a specific class
rather than to the Fund as a whole.
Determination of Net Asset Value Per Share. The net asset values per
share of Class A and Class B shares of the Fund are determined as of 4:00
P.M. New York time each day the New York Stock Exchange (the "NYSE") is
open by dividing the value of the Fund's net assets attributable to that
class by the number of shares of that class outstanding. The NYSE's most
recent annual holiday schedule (which is subject to change) states that
it will close on New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day; it
may also close on other days. Trading may occur in debt securities and
in foreign securities at times when the NYSE is closed (including weekends
and holidays, or after 4:00 P.M. on a regular business day). Because the
net asset values of the Fund will not be calculated at such times, if
securities held in the Fund's portfolio are traded at such times, the net
asset values per share of Class A and Class B shares of the Fund may be
significantly affected on such days when shareholders do not have the
ability to purchase or redeem shares.
The Trust's Board of Trustees has established procedures for the
valuation of the Fund's securities, generally as follows: (i) equity
securities traded on a securities exchange or on NASDAQ are valued at the
last reported sale prices on their primary exchange or NASDAQ that day
(or, in the absence of sales that day, at values based on the last sale
prices of the preceding trading day or closing bid and asked prices); (ii)
NASDAQ and other unlisted equity securities for which last sales prices
are not regularly reported but for which over-the-counter market
quotations are readily available are valued at the highest closing bid
price at the time of valuation, or if no closing bid price is reported,
on the basis of a closing bid price obtained from a dealer who maintains
an active market in that security; (iii) securities (including restricted
securities) not having readily available market quotations are valued at
fair value under the Board's procedures; (iv) unlisted debt securities
having a remaining maturity in excess of 60 days are valued at the mean
between the asked and bid prices determined by a portfolio pricing service
approved by the Trust's Board of Trustees or obtained from an active
market maker on the basis of reasonable inquiry; (v) short-term debt
securities having a remaining maturity of 60 days or less are valued at
cost, adjusted for amortization of premiums and accretion of discounts;
and (vi) securities traded on foreign exchanges or in foreign over-the-
counter markets are valued as determined by a portfolio pricing service,
approved by the Board, based on last sales prices reported on a principal
exchange or the mean between closing bid and asked prices and reflect
prevailing rates of exchange taken from the closing price on the London
foreign exchange market that day. Foreign currency will be valued as
close to the time fixed for the valuation date as is reasonably
practicable. The value of securities denominated in foreign currency will
be converted to U.S. dollars at the prevailing rates of exchange at the
time of valuation.
Trading in securities on European and Asian exchanges and over-
the-counter markets is normally completed before the close of the NYSE.
Events affecting the values of foreign securities traded in such markets
that occur between the time their prices are determined and the close of
the NYSE will not be reflected in the Fund's calculation of net asset
value unless the Board of Trustees, the Manager or the Sub-Adviser, under
procedures established by the Board of Trustees, determines that the
particular event would materially affect the Fund's net asset value, in
which case an adjustment would be made.
In the case of U.S. Government Securities, mortgage-backed
securities, foreign government securities and corporate bonds, when last
sale information is not generally available, such pricing procedures may
include "matrix" comparisons to the prices for comparable instruments on
the basis of quality, yield, maturity, and other special factors involved.
The Trust's Board of Trustees has authorized the Manager and/or the Sub-
Adviser to employ a pricing service to price U.S. Government Securities,
mortgage-backed securities, foreign government securities and corporate
bonds. The Trustees will monitor the accuracy of such pricing services
by comparing prices used for portfolio evaluation to actual sales prices
of selected securities.
Calls, puts and Futures are valued at the last sale prices on the
principal exchanges or on the NASDAQ National Market on which they are
traded, or, if there are no sales that day, in accordance with (i) above.
Forward currency contracts are valued at the closing price on the London
foreign exchange market. When the Fund writes an option, an amount equal
to the premium received by the Fund is included in its Statement of Assets
and Liabilities as an asset, and an equivalent deferred credit is included
in the liability section. The deferred credit is adjusted ("marked-to-
market") to reflect the current market value of the option.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $25.00. Shares will be purchased on the regular business
day the Distributor is instructed to initiate the Automated Clearing House
transfer to buy the shares. Dividends will begin to accrue on such shares
on the day the Fund receives Federal Funds for such purchase through the
ACH system before 4:00 P.M., which is normally 3 days after the ACH
transfer is initiated. The Distributor and the Fund are not responsible
for any delays. If the Federal Funds are received after 4:00 P.M.,
dividends will begin to accrue on the next regular business day after such
Federal Funds are received.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Right of Accumulation
and Letters of Intent because of the economies of sales efforts and
reduction in expenses realized by the Distributor, dealers and brokers
making such sales. No sales charge is imposed in certain other
circumstances described in the Prospectus because the Distributor incurs
little or no selling expenses. The term "immediate family" refers to
one's spouse, children, grandchildren, grandparents, parents, parents-in-
law, brothers and sisters, sons- and daughters-in-law, a sibling's spouse
and a spouse's siblings.
- The OppenheimerFunds. The OppenheimerFunds are those mutual
funds for which the Distributor acts as the distributor or the sub-
distributor and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Time Fund
Oppenheimer Target Fund
Oppenheimer Special Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion High Yield Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Global Fund
Oppenheimer Global Bio-Tech Fund
Oppenheimer Global Environment Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Diversified Income Fund
the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Oppenheimer Tax-Exempt Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
There is an initial sales charge on the purchase of Class A shares
of each of the OppenheimerFunds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund
shares may be subject to a contingent deferred sales charge).
- Letters of Intent. A Letter of Intent ("Letter") is the
investor's statement of intention to purchase Class A shares of the Fund
(and other eligible OppenheimerFunds) sold with a front-end sales charge
during the 13-month period from the investor's first purchase pursuant to
the Letter (the "Letter of Intent period"), which may, at the investor's
request, include purchases made up to 90 days prior to the date of the
Letter. The Letter states the investor's intention to make the aggregate
amount of purchases (excluding any purchases made by reinvestments of
dividends or distributions or purchases made at net asset value without
sales charge), which together with the investor's holdings of such funds
(calculated at their respective public offering prices calculated on the
date of the Letter) will equal or exceed the amount specified in the
Letter to obtain the reduced sales charge rate (as set forth in the
Prospectus) applicable to purchases of shares in that amount (the
"intended amount"). Each purchase under the Letter will be made at the
public offering price applicable to a single lump-sum purchase of shares
in the intended amount, as described in the Prospectus.
In submitting a Letter, the investor makes no commitment to
purchase shares, but if the investor's purchases of shares within the
Letter of Intent period, when added to the value (at offering price) of
the investor's holdings of shares on the last day of that period, do not
equal or exceed the intended amount, the investor agrees to pay the
additional amount of sales charge applicable to such purchases, as set
forth in "Terms of Escrow," below (as those terms may be amended from time
to time). The investor agrees that shares equal in value to 5% of the
intended amount will be held in escrow by the Transfer Agent subject to
the Terms of Escrow. Also, the investor agrees to be bound by the terms
of the Prospectus, this Statement of Additional Information and the
Application used for such Letter of Intent, and if such terms are amended,
as they may be from time to time by the Fund, that those amendments will
apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended amount, the commissions
previously paid to the dealer of record for the account and the amount of
sales charge retained by the Distributor will be adjusted to the rates
applicable to actual total purchases. If total eligible purchases during
the Letter of Intent period exceed the intended amount and exceed the
amount needed to qualify for the next sales charge rate reduction set
forth in the applicable prospectus, the sales charges paid will be
adjusted to the lower rate, but only if and when the dealer returns to the
Distributor the excess of the amount of commissions allowed or paid to the
dealer over the amount of commissions that apply to the actual amount of
purchases. The excess commissions returned to the Distributor will be
used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly
after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to advise the Distributor about the Letter
in placing any purchase orders for the investor during the Letter of
Intent period. All of such purchases must be made through the
Distributor.
- Terms of Escrow that Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in value
to 5% of the intended amount specified in the Letter shall be held in
escrow by the Transfer Agent. For example, if the intended amount
specified under the Letter is $50,000, the escrow shall be shares valued
in the amount of $2,500 (computed at the public offering price adjusted
for a $50,000 purchase). Any dividends and capital gains distributions
on the escrowed shares will be credited to the investor's account.
2. If the total minimum investment specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period
the total purchases pursuant to the Letter are less than the intended
amount specified in the Letter, the investor must remit to the Distributor
an amount equal to the difference between the dollar amount of sales
charges actually paid and the amount of sales charges which would have
been paid if the total amount purchased had been made at a single time.
Such sales charge adjustment will apply to any shares redeemed prior to
the completion of the Letter. If such difference in sales charges is not
paid within twenty days after a request from the Distributor or the
dealer, the Distributor will, within sixty days of the expiration of the
Letter, redeem the number of escrowed shares necessary to realize such
difference in sales charges. Full and fractional shares remaining after
such redemption will be released from escrow. If a request is received
to redeem escrowed shares prior to the payment of such additional sales
charge, the sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for
redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the
holding of which may be counted toward completion of the Letter) do not
include any shares sold without a front-end sales charge or shares subject
to a Class A contingent deferred sales charge unless (for the purpose of
determining completion of the obligation to purchase shares under the
Letter) the shares were acquired in exchange for shares of one of the
OppenheimerFunds whose shares were acquired by payment of a sales charge.
6. Shares held in escrow hereunder will automatically be exchanged
for shares of another fund to which an exchange is requested, as described
in the section of the Prospectus entitled "How to Exchange Shares," and
the escrow will be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank
account, a check (minimum $25) for the initial purchase must accompany the
application. Shares purchased by Asset Builder Plan payments from bank
accounts are subject to the redemption restrictions for recent purchases
described in "How To Sell Shares," in the Prospectus. Asset Builder Plans
also enable shareholders of Oppenheimer Tax-Exempt Cash Reserves or
Oppenheimer Cash Reserves to use those accounts for monthly automatic
purchases of shares of up to four other Eligible Funds.
There is a sales charge on the purchase of certain Eligible Funds.
An application should be obtained from the Transfer Agent, completed and
returned, and a prospectus of the selected fund(s) (available from the
Distributor) should be obtained before initiating Asset Builder payments.
The amount of the Asset Builder investment may be changed or the automatic
investments may be terminated at any time by writing to the Transfer
Agent. A reasonable period (approximately 15 days) is required after the
Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans
at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the
Fund's shares (for example, when a purchase check is returned to the Fund
unpaid) causes a loss to be incurred when the net asset value of the
Fund's shares on the cancellation date is less than on the purchase date.
That loss is equal to the amount of the decline in the net asset value per
share multiplied by the number of shares in the purchase order. The
investor is responsible for that loss. If the investor fails to
compensate the Fund for the loss, the Distributor will do so. The Fund
may reimburse the Distributor for that amount by redeeming shares from any
account registered in that investor's name, or the Fund or the Distributor
may seek other redress.
Checkwriting. When a check is presented to the Bank for clearance, the
Bank will ask the Fund to redeem a sufficient number of full and
fractional shares in the shareholder's account to cover the amount of the
check. This enables the shareholder to continue receiving dividends on
those shares until the check is presented to the Fund. Checks may not be
presented for payment at the offices of the Bank or the Fund's Custodian.
This limitation does not affect the use of checks for the payment of bills
or to obtain cash at other banks. The Fund reserves the right to amend,
suspend or discontinue offering checkwriting privileges at any time
without prior notice.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and conditions for
redemptions set forth in the Prospectus.
- Payments "In Kind". The Prospectus states that payment for
shares tendered for redemption is ordinarily made in cash. However, if the
Board of Trustees of the Trust determines that it would be detrimental to
the best interests of the remaining shareholders of the Fund to make
payment of a redemption order wholly or partly in cash, the Fund may pay
the redemption proceeds in whole or in part by a distribution "in kind"
of securities from the portfolio of the Fund, in lieu of cash, in
conformity with applicable rules of the Securities and Exchange
Commission. The Fund has elected to be governed by Rule 18f-1 under the
Investment Company Act, pursuant to which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net assets
of the Fund during any 90-day period for any one shareholder. If shares
are redeemed in kind, the redeeming shareholder might incur brokerage or
other costs in selling the securities for cash. The method of valuing
securities used to make redemptions in kind will be the same as the method
the Fund uses to value it portfolio securities described above under
"Determination of Net Asset Value Per Share" and such valuation will be
made as of the time the redemption price is determined.
- Involuntary Redemptions. The Trust's Board of Trustees has the
right to cause the involuntary redemption of the shares held in any
account if the aggregate net asset value of such shares is less than
$1,000 or such lesser amount as the Board may fix. The Board of Trustees
will not cause the involuntary redemption of shares in an account if the
aggregate net asset value of such shares has fallen below the stated
minimum solely as a result of market fluctuations. Should the Board elect
to exercise this right, it may also fix, in accordance with the Investment
Company Act, the requirements for any notice to be given to the
shareholders in question (not less than 30 days), or may set requirements
for permission to increase the investment, and other terms and conditions
so that the shares would not be involuntarily redeemed.
Reinvestment Privilege. Within six months of a redemption, a
shareholder may reinvest all or part of the redemption proceeds of (i)
Class A shares, or (ii) Class B shares that were subject to the Class B
contingent deferred sales charge when redeemed, in Class A shares of the
Fund or any of the other OppenheimerFunds into which shares of the Fund
are exchangeable as described below, at the net asset value next computed
after receipt by the Transfer Agent of the reinvestment order. The
shareholder must ask the Distributor for such privilege at the time of
reinvestment. Any capital gain that was realized when the shares were
redeemed is taxable, and reinvestment will not alter any capital gains tax
payable on that gain. If there has been a capital loss on the redemption,
some or all of the loss may not be tax deductible, depending on the timing
and amount of the reinvestment. However, in that case the sales charge
would be added to the basis of the shares acquired by the reinvestment of
the redemption proceeds. Under the Internal Revenue Code, if the
redemption proceeds of Fund shares on which a sales charge was paid are
reinvested in shares of the Fund or another of the OppenheimerFunds within
90 days of payment of the sales charge, the shareholder's basis in the
shares of the Fund that were redeemed may not include the amount of the
sales charge paid. That would reduce the loss or increase the gain
recognized from the redemption. The Fund may amend, suspend or cease
offering this reinvestment privilege at any time as to shares redeemed
after the date of such amendment, suspension or cessation.
Transfer of Shares. Shares are not subject to the payment of a contingent
deferred sales charge of either class at the time of transfer to the name
of another person or entity (whether the transfer occurs by absolute
assignment, gift or bequest, not involving, directly or indirectly, a
public sale). The transferred shares will remain subject to the
contingent deferred sales charge, calculated as if the transferee
shareholder had acquired the transferred shares in the same manner and at
the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the
account would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus under
"How to Buy Shares" for the imposition of the Class B contingent deferred
sales charge will be followed in determining the order in which shares are
transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, or pension or
profit-sharing plans should be addressed to "Trustee, OppenheimerFunds
Retirement Plans," c/o the Transfer Agent at its address listed in "How
To Sell Shares" in the Prospectus. The request must: (i) state the reason
for the distribution; (ii) state the owner's awareness of tax penalties
if the distribution is premature; and (iii) conform to the requirements
of the plan and the Fund's other redemption requirements. Participants
(other than self-employed persons) in OppenheimerFunds-sponsored pension
or profit-sharing plans may not directly request redemption of their
accounts. The employer or plan administrator must sign the request.
Distributions from pension and profit sharing plans are subject to special
requirements under the Internal Revenue Code and certain documents
(available from the Transfer Agent) must be completed before the
distribution may be made. Distributions from retirement plans are subject
to withholding requirements under the Internal Revenue Code, and IRS Form
W-4P (available from the Transfer Agent) must be submitted to the Transfer
Agent with the distribution request, or the distribution may be delayed.
Unless the shareholder has provided the Transfer Agent with a certified
tax identification number, the Internal Revenue Code requires that tax be
withheld from any distribution even if the shareholder elects not to have
tax withheld. The Fund, the Manager, the Distributor, the Trustee and the
Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not
be responsible for any tax penalties assessed in connection with a
distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers.
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price will be the net asset
value next computed after the receipt of an order placed by such dealer
or broker, except that orders received from dealers or brokers after 4:00
P.M. on a regular business day will be processed at that day's net asset
value if such orders were received by the dealer or broker from its
customers prior to 4:00 P.M., and were transmitted to and received by the
Distributor prior to its close of business that day (normally 5:00 P.M.).
Payment ordinarily will be made within seven days after the Distributor's
receipt of the required documents, with signature(s) guaranteed as
described above.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the
Fund valued at $5,000 or more can authorize the Transfer Agent to redeem
shares (minimum $50) automatically on a monthly, quarterly, semi-annual
or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are by check
payable to all shareholders of record and sent to the address of record
for the account (and if the address has not been changed within the prior
30 days). Required minimum distributions from OppenheimerFunds-sponsored
retirement plans may not be arranged on this basis. Payments are normally
made by check, but shareholders having AccountLink privileges (see "How
To Buy Shares") may arrange to have Automatic Withdrawal Plan payments
transferred to the bank account designated on the OppenheimerFunds New
Account Application or signature-guaranteed instructions. The Fund cannot
guarantee receipt of the payment on the date requested and reserves the
right to amend, suspend or discontinue offering such plans at any time
without prior notice. Because of the sales charge assessed on Class A
share purchases, shareholders should not make regular additional Class A
purchases while participating in an Automatic Withdrawal Plan. Class B
shareholders should not establish withdrawal plans, because of the
imposition of the Class B CDSC on such withdrawals (except where the Class
B CDSC is waived as described in "Class B Contingent Deferred Sales
Charge").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such plans,
as stated below and in the provisions of the OppenheimerFunds Application
relating to such Plans, as well as the Prospectus. These provisions may
be amended from time to time by the Fund and/or the Distributor. When
adopted, such amendments will automatically apply to existing Plans.
- Automatic Exchange Plans. Shareholders can authorize the
Transfer Agent (on the OppenheimerFunds Application or signature-
guaranteed instructions) to exchange a pre-determined amount of shares of
the Fund for shares (of the same class) of other OppenheimerFunds
automatically on a monthly, quarterly, semi-annual or annual basis under
an Automatic Exchange Plan. The minimum amount that may be exchanged to
each other fund account is $25. Exchanges made under these plans are
subject to the restrictions that apply to exchanges as set forth in
"Exchange Privilege" in the Prospectus and "How to Exchange Shares" below
in this Statement of Additional Information.
- Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales
charge will be redeemed first and thereafter shares acquired with
reinvested dividends and capital gains distributions will be redeemed
next, followed by shares acquired with a sales charge, to the extent
necessary to make withdrawal payments. Depending upon the amount
withdrawn, the investor's principal may be depleted. Payments made under
such plans should not be considered as a yield or income on your
investment. It may not be desirable to purchases additional Class A
shares while making automatic withdrawals because of the sales charges
that apply to purchases when made. Accordingly, a shareholder
normally should not maintain an Automatic Withdrawal Plan while
simultaneously making regular purchases of Class A shares.
The transfer agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the "Planholder")
who executed the Plan authorization and application submitted to the
Transfer Agent. The Transfer Agent shall incur no liability to the
Planholder for any action taken or omitted by the Transfer Agent in good
faith to administer the Plan. Certificates will not be issued for shares
of the Fund purchased for and held under the Plan, but the Transfer Agent
will credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan application so
that the shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions
of capital gains must be reinvested in shares of the Fund, which will be
done at net asset value without a sales charge. Dividends on shares held
in the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be
made at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (the date selected for receipt is an approximate
date), according to the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the
address to which checks are to be mailed or AccountLink payments are to
be sent may be changed at any time by the Planholder by writing to the
Transfer Agent. A signature guarantee may be required. The Planholder
should allow at least two weeks' time in mailing such notification for the
requested change to be put in effect. The Planholder may, at any time,
instruct the Transfer Agent by written notice (in proper form in
accordance with the requirements of the then-current Prospectus of the
Fund) to redeem all, or any part of, the shares held under the Plan. In
that case, the Transfer Agent will redeem the number of shares requested
at the net asset value per share in effect in accordance with the Fund's
usual redemption procedures and will mail a check for the proceeds to the
Planholder.
The Plan may be terminated at any time by the Planholder by
writing to the Transfer Agent. A Plan may also be terminated at any time
by the Transfer Agent upon receiving directions to that effect from the
Fund. The Transfer Agent will also terminate a Plan upon receipt of
evidence satisfactory to it of the death or legal incapacity of the
Planholder. Upon termination of a Plan by the Transfer Agent or the Fund,
shares that have not been redeemed from the account will be held in
uncertificated form in the name of the Planholder, and the account will
continue as a dividend-reinvestment, uncertificated account unless and
until proper instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated
form. Upon written request from the Planholder, the Transfer Agent will
determine the number of shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the
Fund, the Planholder will be deemed to have appointed any successor
transfer agent to act as agent in administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of
OppenheimerFunds having more than one class of shares may be exchanged
only for shares of the same class of other OppenheimerFunds. All of the
OppenheimerFunds offer Class A shares, but only the following other
OppenheimerFunds offer Class B shares:
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Value Stock Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer High Yield Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Cash Reserves (Class B shares are only
available by exchange)
Oppenheimer Special Fund
Oppenheimer Equity Income Fund
Oppenheimer Global Fund
Oppenheimer Discovery Fund
Class A shares of OppenheimerFunds may be exchanged for shares of
any Money Market Fund; shares of any Money Market Fund purchased without
a sales charge may be exchanged for shares of OppenheimerFunds offered
with a sales charge upon payment of the sales charge (or, if applicable,
may be used to purchase shares of OppenheimerFunds subject to a CDSC); and
shares of this Fund acquired by reinvestment of dividends or distributions
from any other of the OppenheimerFunds or from any unit investment trust
for which reinvestment arrangements have been made with the Distributor
may be exchanged at net asset value for shares of any of the
OppenheimerFunds. No CDSC is imposed on exchanges of shares of either
class purchased subject to a CDSC. However, when Class A shares acquired
by exchange of Class A shares purchased subject to a Class A CDSC are
redeemed within 18 months of the end of the calendar month of the initial
purchase of the exchanged Class A shares, the Class A CDSC is imposed on
the redeemed shares (see "Class A Contingent Deferred Sales Charge" in the
Prospectus), and the Class B CDSC is imposed on Class B shares redeemed
within six years of the initial purchase of the exchanged Class B shares.
The Fund reserves the right to reject telephone or written
exchange requests submitted in bulk by anyone on behalf of 10 or more
accounts. The Fund may accept requests for exchanges of up to 50 accounts
per day from representatives of authorized dealers that qualify for this
privilege. In connection with any exchange request, the number of shares
exchanged may be less than the number requested if the exchange or the
number requested would include shares subject to a restriction cited in
the Prospectus or this Statement of Additional Information or shares
covered by a share certificate that is not tendered with the request. In
those cases, only the shares available for exchange without restriction
will be exchanged.
When Class B shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the
imposition of the Class B contingent deferred sales charge will be
followed in determining the order in which the shares are exchanged.
Shareholders should take into account the effect of any exchange on the
applicability and rate of any contingent deferred sales charge that might
be imposed in the subsequent redemption of remaining shares. Shareholders
owning shares of both classes must specify whether they intend to exchange
Class A or Class B shares.
When exchanging shares by telephone, the shareholder must either
have an existing account in the fund to which the exchange is to be made.
For full or partial exchanges of an account made by telephone, any special
account features such as Asset Builder Plans, Automatic Withdrawal Plans
and retirement plan contributions will be switched to the new account
unless the Transfer Agent is instructed otherwise. If all telephone lines
are busy (which might occur, for example, during periods of substantial
market fluctuations), shareholders might not be able to request exchanges
by telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day
the Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it (for example, if the receipt of multiple exchange
request from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different OppenheimerFunds available for exchange have
different investment objectives, policies and risks, and a shareholder
should assure that the Fund selected is appropriate for his or her
investment and should be aware of the tax consequences of an exchange.
For federal tax purposes, an exchange transaction is treated as a
redemption of shares of one fund and a purchase of shares of another.
"Reinvestment Privilege," above, discusses some of the tax consequences
of reinvestment of redemption proceeds in such cases. The Fund, the
Distributor, and the Transfer Agent are unable to provide investment, tax
or legal advice to a shareholder in connection with an exchange request
or any other transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. Dividends will be payable on shares held of
record at the time of the previous determination of net asset value, or
as otherwise described in "How to Buy Shares." Daily dividends on newly
purchased shares will not be declared or paid until such time as Federal
Funds (funds credited to a member bank's account at the Federal Reserve
Bank) are available from the purchase payment for such shares. Normally,
purchase checks received from investors are converted to Federal Funds on
the next business day. Dividends will be declared on shares repurchased
by a dealer or broker for four business days following the trade date
(i.e., to and including the day prior to settlement of the repurchase).
If all shares in an account are redeemed, all dividends accrued on shares
of the same class in the account will be paid together with the redemption
proceeds.
Dividends, distributions and the proceeds of the redemption of
Fund shares represented by checks returned to the Transfer Agent by the
Postal Service as undeliverable will be invested in shares of Oppenheimer
Money Market Fund, Inc., as promptly as possible after the return of such
checks to the Transfer Agent, to enable the investor to earn a return on
otherwise idle funds.
Tax Status of the Fund's Dividends and Distributions. The Federal tax
treatment of the Fund's dividends and capital gains distributions is
explained in the Prospectus under the caption "Dividends, Capital Gains
and Taxes." Special provisions of the Internal Revenue Code govern the
eligibility of the Fund's dividends for the dividends-received deduction
for corporate shareholders. Long-term capital gains distributions are not
eligible for the deduction. In addition, the amount of dividends paid by
the Fund which may qualify for the deduction is limited to the aggregate
amount of qualifying dividends which the Fund derives from its portfolio
investments that the Fund has held for a minimum period, usually 46 days.
A corporate shareholder will not be eligible for the deduction on
dividends paid on shares held for 45 days or less. To the extent the
Fund's dividends are derived from its gross income from option premiums,
interest income or short-term gains from the sale of securities, or
dividends from foreign corporations, its dividends will not qualify for
the deduction. It is expected that for the most part the Fund's dividends
will not qualify, because of the nature of the investments held by the
Fund in its portfolio.
The amount of a class's distributions may vary from time to time
depending on market conditions, the composition of the Fund's portfolio,
and expenses borne by the Fund or borne separately by a class, as
described in "Alternative Sales Arrangements -- Class A and Class B,"
above. Dividends are calculated in the same manner, at the same time and
on the same day for shares of each class. However, dividends on Class B
shares are expected to be lower as a result of the asset-based sales
charge on Class B shares, and Class B dividends will also differ in amount
as a consequence of any difference in net asset value between Class A and
Class B shares.
Distributions may be made annually in December out of any net
short-term or long-term capital gains realized from the sale of
securities, premiums from expired calls written by the Fund and net
profits from Hedging Instruments and closing purchase transactions
realized in the twelve months ending on October 31 of the current year.
Any difference between the net asset value of Class A and Class B shares
will be reflected in such distributions. Distributions from net short-
term capital gains are taxable to shareholders as ordinary income and when
paid by the Fund are considered "dividends." The Fund may make a
supplemental distribution of capital gains and ordinary income following
the end of its fiscal year. Any long-term capital gains distributions
will be identified separately when paid and when tax information is
distributed by the Fund. If prior distributions must be re-characterized
at the end of the fiscal year as a result of the effect of the Fund's
investment policies, shareholders may have a non-taxable return of
capital, which will be identified in notices to shareholders. There is
no fixed dividend rate and there can be no assurance as to the payment of
any dividends or the realization of any capital gains.
If the Fund qualifies as a "regulated investment company" under
the Internal Revenue Code, it will not be liable for Federal income taxes
on amounts paid by it as dividends and distributions. The Fund qualified
as a regulated investment company in its last fiscal year and intends to
qualify in future years, but reserves the right not to qualify. The
Internal Revenue Code contains a number of complex tests to determine
whether the Fund will qualify, and the Fund might not meet those tests in
a particular year. For example, if the Fund derives 30% or more of its
gross income from the sale of securities held less than three months, it
may fail to qualify (see "Tax Aspects of Covered Calls and Hedging
Instruments," above). If it does not qualify, the Fund will be treated for
tax purposes as an ordinary corporation and will receive no tax deduction
for payments of dividends and distributions made to shareholders.
Under the Internal Revenue Code, by December 31 each year the Fund
must distribute 98% of its taxable investment income earned from January
1 through December 31 of that year and 98% of its capital gains realized
in the period from November 1 of the prior year through October 31 of the
current year, or else the Fund must pay an excise tax on the amounts not
distributed. While it is presently anticipated that the Fund will meet
those requirements, the Fund's Board and the Manager might determine in
a particular year that it would be in the best interest of shareholders
for the Fund not to make such distributions at the required levels and to
pay the excise tax on the undistributed amounts. That would reduce the
amount of income or capital gains available for distribution to
shareholders.
The Internal Revenue Code requires that a holder (such as the
Fund) of a zero coupon security accrue as income each year a portion of
the discount at which the security was purchased even though the Fund
receives no interest payment in cash on the security during the year. As
an investment company, the Fund must pay out substantially all of its net
investment income each year or be subject to excise taxes, as described
above. Accordingly, when the Fund holds zero coupon securities, it may
be required to pay out as an income distribution each year an amount which
is greater than the total amount of cash interest the Fund actually
received during that year. Such distributions will be made from the cash
assets of the Fund or by liquidation of portfolio securities, if
necessary. The Fund may realize a gain or loss from such sales. In the
event the Fund realizes net capital gains from such transactions, its
shareholders may receive a larger capital gain distribution than they
would have had in the absence of such transactions.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may
elect to reinvest all dividends and/or capital gains distributions in
shares of the same class of any of the other OppenheimerFunds listed in
"Reduced Sales Charges" above at net asset value without sales charge.
Class B shareholders should be aware that as of the date of this Statement
of Additional Information, not all OppenheimerFunds offer Class B shares.
The names of funds that do offer Class B shares can be obtained by
referring to "How to Exchange Shares," above or by calling the Distributor
at 1-800-525-7048. To elect this option, the shareholder must notify the
Transfer Agent in writing and either have an existing account in the fund
selected for reinvestment or must obtain a prospectus for that fund and
an application from the Distributor to establish an account. The
investment will be made at the net asset value per share in effect at the
close of business on the payable date of the dividend or distribution.
Dividends and/or distributions from certain of the OppenheimerFunds may
be invested in shares of this Fund on the same basis.
Additional Information About The Fund
The Custodian. The Bank of New York is the Custodian of the Fund's
assets. The Custodian's responsibilities include safeguarding and
controlling the Fund's portfolio securities, collecting income on the
portfolio securities and handling the delivery of such securities to and
from the Fund. The Manager has represented to the Fund that the banking
relationships between the Manager and the Custodian have been and will
continue to be unrelated to and unaffected by the relationship between the
Fund and the Custodian. It will be the practice of the Fund to deal with
the Custodian in a manner uninfluenced by any banking relationship the
Custodian may have with the Manager and its affiliates.
Independent Auditors. The independent auditors of the Fund audit the
Fund's financial statements and perform other related audit services.
They also act as auditors for certain other funds advised by the Manager
and its affiliates.
Description of Securities Ratings
Description of Standard & Poor's Corporation ("Standard & Poor's") and
Moody's Investors Service, Inc. ("Moody's") commercial paper, bond and
municipal securities ratings:
Commercial Paper Ratings
Standard & Poor's commercial paper ratings are graded into four
categories, ranging from "A" for the highest quality obligations to "D"
for the lowest. The "A-l" and "A-2" categories are described as follows:
"A" - Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are further
refined with the designations 1, 2, and 3 to indicate the relative degree
of safety.
"A-l" - This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics will be noted
with a plus (+) sign designation.
"A-2" - Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for
issues designated "A-l."
Moody's employs three designations, all judged to be investment grade, to
indicate the relative repayment ability of rated issuers. The two highest
designations are as follows:
Issuers (or supporting institutions) rated Prime-1 (or P-1) have a
superior ability for repayment of senior short-term debt obligations.
Prime-1 repayment ability will normally be evidenced by many of the
following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers (or supporting institutions) rated Prime-2 (or P-2) have a strong
ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to
a lesser degree. Earnings trends and coverage ratios, while sound, may be
more
subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
S&P's ratings for Municipal Notes due in three years or less are:
SP-1: Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest.
Bond Ratings
Standard & Poor's describes its four highest ratings for corporate debt
as follows:
AAA: Debt rated "AAA" has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is
extremely strong.
AA: Debt rated "AA" has a very strong capacity to pay interest and
repay principal and differ from the higher rated issues only in
a small degree.
A: Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB: Debt rated "BBB" is regarded as having an adequate capacity to
pay interest and repay principal.
Whereas it normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
The ratings from AA to CCC may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
Moody's describes its four highest corporate bond ratings as follows:
Aaa: Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
as in Aaa securities or fluctuation of protective elements may
be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in
Aaa securities.
A: Bonds which are rated A possess many favorable investment
attributes and may be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-
range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
<PAGE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders of Oppenheimer
Investment Grade Bond Fund:
We have audited the accompanying statement of assets
and liabilities, including the statement of
investments, of Oppenheimer Investment Grade Bond
Fund as of December 31, 1993, the related
statement of operations for the year then ended, the
statements of changes in net assets for the years
ended December 31, 1993 and 1992 and the financial
highlights for the period January 1, 1991 to
December 31, 1993. These financial statements and
financial highlights are the responsibility of the
Fund's management. Our responsibility is to express
an opinion on these financial statements and
financial highlights based on our audits. The
financial highlights (except for total return) for
the period February 1, 1983 to December 31, 1990
were audited by other auditors whose report dated
February 4, 1991, expressed an unqualified opinion
on those financial highlights.
We conducted our audits in accordance with
generally accepted auditing standards. Those
standards require that we plan and perform the audit
to obtain reasonable assurance about whether the
financial statements and financial highlights are
free of material misstatement. An audit also
includes examining, on a test basis, evidence
supporting the amounts and disclosures in the
financial statements. Our procedures included
confirmation of securities owned at December 31,
1993 by correspondence with the custodian and
brokers; where replies were not received from
brokers, we performed other auditing procedures. An
audit also includes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall
financial statement presentation. We believe that
our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and
financial highlights present fairly, in all material
respects, the financial position of Oppenheimer
Investment Grade Bond Fund at December 31, 1993, the
results of its operations, the changes in its net
assets, and the financial highlights for the
respective stated periods, in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE
Denver, Colorado
January 21, 1994
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------
STATEMENT OF INVESTMENTS December 31, 1993
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM SECURITIES: COMMERCIAL PAPER--15.7%
- -----------------------------------------------------------------------------------------------------------------------------------
Caterpillar Financial Services Corp., 3.40%, 1/6/94 $2,500,000 $2,498,819
-----------------------------------------------------------------------------------------------------
ConAgra, Inc., 3.40%, 1/11/94 1,975,000 1,973,135
-----------------------------------------------------------------------------------------------------
Countrywide Funding Corp., 3.50%, 1/3/94 2,500,000 2,499,514
-----------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 3.40%, 1/5/94 160,000 160,000
-----------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 3.05%, 1/3/94 390,000 390,000
-----------------------------------------------------------------------------------------------------
GTE Northwest, Inc., 3.31%, 1/12/94 1,800,000 1,798,180
-----------------------------------------------------------------------------------------------------
ITT Financial Corp., 3.35%, 1/7/94 665,000 665,000
-----------------------------------------------------------------------------------------------------
Kerr-McGee Credit Corp., 3.45%, 1/4/94 2,500,000 2,499,281
-----------------------------------------------------------------------------------------------------
Maytag Corp., 3.55%, 1/10/94 1,900,000 1,898,314
-----------------------------------------------------------------------------------------------------
Public Service Co. of Colorado, 3.70%, 1/7/94 1,185,000 1,184,269
-----------------------------------------------------------------------------------------------------
Tyson Foods, Inc., 3.45%, 1/5/94 2,100,000 2,099,195
------------
Total Short-Term Securities: Commercial Paper (Cost $17,665,707) 17,665,707
- -----------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT OBLIGATIONS--64.1%
- -----------------------------------------------------------------------------------------------------------------------------------
AGENCY: FULL FAITH Allentown, Pennsylvania, 8.74% U.S. Government Gtd. Nts., Series A, 8/1/01 65,000
75,934
AND CREDIT--1.1% -----------------------------------------------------------------------------------------------------
Fajardo, Puerto Rico, 8.74% U.S. Government Gtd. Nts., Series A, 8/1/01 300,000 350,466
-----------------------------------------------------------------------------------------------------
New Haven, Connecticut, 8.74% U.S. Government Gtd. Nts., Series A, 8/1/01 400,000
467,288
-----------------------------------------------------------------------------------------------------
Trujillo Alto, Puerto Rico, 8.74% U.S. Government Gtd. Nts., Series A, 8/1/01 235,000 274,531
------------
1,168,219
- -----------------------------------------------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE Federal Home Loan Mortgage Corp., 7.50% Collateralized Mortgage
OBLIGATIONS/GOVERNMENT--7.0% Obligation Gtd. Multiclass Mortgage Participation Certificates, 2/15/07 2,000,000
2,083,700
-----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 7% Gtd. Multiclass Mortgage
Participation Certificates, Series 1460, Cl. 1460-H, 5/15/07 1,500,000 1,543,890
-----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 58.60% Collateralized Mortgage
Obligation Gtd. Real Estate Mortgage Investment Conduit Pass-Through
Certificates, 10/25/22(1) 883,689 636,256
-----------------------------------------------------------------------------------------------------
JHM Acceptance Corp., 8.96% Collateralized Mortgage
Obligation, Series E, Cl. E-6, 4/1/19 2,000,000 2,142,880
-----------------------------------------------------------------------------------------------------
Morgan Stanley Mortgage Trust 28, 8% Collateralized
Mortgage Obligation, Series 28, Cl. 28-5, 12/1/15 1,437,032 1,459,895
------------
7,866,621
- -----------------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED Federal Home Loan Mortgage Corp.:
SECURITIES--4.8% 13.50%, 11/1/10 136,564 158,472
12.50%, 4/1/14 66,775 75,804
9% Certificates of Participation, 3/1/17 1,080,848 1,150,963
-----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 8% Gtd. Mortgage
Pass-Through Certificates, 8/1/17 1,446,631 1,513,060
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------------
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
MORTGAGE-BACKED SECURITIES Government National Mortgage Assn.:
(CONTINUED) 12%, 1/15/99 $110,981 $123,443
9%, 2/15/09 305,000 328,266
9%, 3/15/09 271,249 291,941
9%, 5/15/09 34,955 37,621
9%, 6/15/09 190,257 204,770
10%, 11/15/09 1,281,866 1,405,797
15%, 2/15/12 26,453 31,364
12%, 5/15/14 3,170 3,706
12.75%, 5/15/15 31,287 36,146
12.75%, 6/15/15 68,024 78,590
------------
5,439,943
- -----------------------------------------------------------------------------------------------------------------------------------
TREASURY--50.2% U.S. Treasury Bonds:
7.875%, 2/15/21 900,000 1,048,212
8%, 11/15/21 2,000,000 2,369,360
7.25%, 8/15/22 7,600,000 8,295,855
7.125%, 2/15/23 4,000,000 4,329,960
-----------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
8.50%, 7/15/97 6,925,000 7,751,637
6.375%, 1/15/99 1,200,000 1,260,744
7%, 4/15/99 12,350,000 13,326,390
8%, 5/15/01 1,900,000 2,174,303
7.875%, 8/15/01 2,600,000 2,959,918
5.57%, 8/15/03 13,000,000 12,959,309
------------
56,475,688
- -----------------------------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT Quebec, Canada (Province of), 8.80% Debs., 4/15/03 1,000,000
1,156,200
------------
BONDS AND NOTES--1.0% Total Government Obligations (Cost $70,668,745)
72,106,671
- -----------------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--1.2%
- -----------------------------------------------------------------------------------------------------------------------------------
AUTO RECEIVABLES--1.2% General Motors Acceptance Corp. Grantor Trust,
Series 1992-E, Cl.A, 4.75%, 8/15/97 879,210 884,694
-----------------------------------------------------------------------------------------------------
Select Auto Receivables Trust, 7.65% Asset-Backed Certificates,
1991-2 Cl. A, 7/15/96 499,029 509,963
------------
Total Asset-Backed Securities (Cost $1,383,949) 1,394,657
- -----------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--29.1%
- -----------------------------------------------------------------------------------------------------------------------------------
AIRLINES--1.5% United Air Lines, Inc., 10.11% 1991 Equipment Trust Certificates,
Series B, 2/19/06 1,467,010 1,700,363
- -----------------------------------------------------------------------------------------------------------------------------------
AUTOMOBILES, TRUCKS Ford Motor Co., 7.875% Debs., 10/15/96 3,000,000
3,188,823
AND PARTS--2.9%
- -----------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES--1.4% Comdisco, Inc., 6.20% Med.-Term Nts., 3/15/96 1,500,000
1,529,063
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL/INSURANCE--3.7% Ford Motor Credit Co., 9.90% Med.-Term Nts., 11/6/97 2,000,000
2,237,206
-----------------------------------------------------------------------------------------------------
Leucadia National Corp., 7.75% Sr. Nts., 8/15/13 2,000,000 1,955,948
------------
4,193,154
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------
STATEMENT OF INVESTMENTS (Continued)
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
FOOD AND RESTAURANTS--1.0% Wendy's International, Inc., 12.125% Debs., 4/1/95 $1,000,000
$1,077,300
- -----------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE/MEDICAL Baxter International, Inc., 9.25% Nts., 9/15/96 1,000,000
1,102,631
PRODUCTS--1.8% -----------------------------------------------------------------------------------------------------
Imcera Group, Inc., 6% Nts., 10/15/03 1,000,000 967,128
------------
2,069,759
- -----------------------------------------------------------------------------------------------------------------------------------
HOTELS/MOTELS--1.3% Marriott International, Inc., 6.75% Sr. Nts., Series A, 12/15/03 1,500,000
1,493,377
- -----------------------------------------------------------------------------------------------------------------------------------
LEISURE/ENTERTAINMENT--0.9% Toro Co. (The), 11% Debs., 8/1/17 1,000,000
1,055,000
- -----------------------------------------------------------------------------------------------------------------------------------
MANUFACTURING: Textron, Inc., 9.55% Med.-Term Nts., 3/19/01 500,000
597,940
DIVERSIFIED--0.5%
- -----------------------------------------------------------------------------------------------------------------------------------
MEDIA--2.3% News America Holdings, Inc., 7.50% Gtd. Sr. Nts., 3/1/00 2,500,000
2,610,640
- -----------------------------------------------------------------------------------------------------------------------------------
METALS/MINING--3.5% AMAX, Inc., 9.875% Nts., 6/13/01 1,000,000
1,177,383
-----------------------------------------------------------------------------------------------------
Newmont Mining Corp., 8.625% Nts., 4/1/02 1,000,000 1,112,903
-----------------------------------------------------------------------------------------------------
Teck Corp., 8.70% Debs., 5/1/02 1,500,000 1,665,801
------------
3,956,087
- -----------------------------------------------------------------------------------------------------------------------------------
OIL AND GAS: EXPLORATION Marathon Oil Co., 9.50% Gtd. Nts., 3/1/94 1,500,000
1,508,506
AND PRODUCTION--1.4%
- -----------------------------------------------------------------------------------------------------------------------------------
OIL AND GAS: INTEGRATED--2.9% Union Oil Co. of California:
9.625% Gtd. Debs., 5/15/96 1,500,000 1,593,485
8.75% Nts., 8/15/01 1,500,000 1,696,594
------------
3,290,079
- -----------------------------------------------------------------------------------------------------------------------------------
PAPER AND FOREST Georgia-Pacific Corp., 9.95% Debs., 6/15/02 1,500,000
1,816,089
PRODUCTS--1.6%
- -----------------------------------------------------------------------------------------------------------------------------------
RAILROADS/EQUIPMENT--2.4% CSX Corp., 9.50% Sr. Nts., 11/15/96 2,500,000
2,705,147
------------
Total Corporate Bonds and Notes (Cost $31,523,837) 32,791,327
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $121,242,238) 110.1%
123,958,362
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (10.1) (11,389,977)
--------- ------------
NET ASSETS 100.0% $112,568,385
--------- ------------
--------- ------------
<FN>
1. Interest rate resets monthly, based on LIBOR.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES December 31, 1993
<C> <S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
ASSETS Investments, at value (cost $121,242,238)--see accompanying statement $123,958,362
-------------------------------------------------------------------------------------------------------
Cash 215,492
-------------------------------------------------------------------------------------------------------
Receivables:
Interest 1,737,916
Shares of beneficial interest sold 431,065
Investments sold 188,975
-------------------------------------------------------------------------------------------------------
Other 22,252
------------
Total assets 126,554,062
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES Payables and other liabilities:
Investments purchased 12,972,500
Dividends 569,872
Shares of beneficial interest redeemed 239,614
Distribution assistance--Note 4 77,058
Deferred trustee fees--Note 5 34,149
Other 92,484
------------
Total liabilities 13,985,677
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $112,568,385
------------
------------
- -----------------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS Paid-in capital $111,376,568
-------------------------------------------------------------------------------------------------------
Overdistributed net investment income (56,074)
-------------------------------------------------------------------------------------------------------
Accumulated net realized loss from investment transactions (1,468,233)
-------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments--Note 3 2,716,124
------------
Net assets $112,568,385
------------
------------
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE Class A Shares:
Net asset value and redemption price per share (based on net assets of $110,759,490 and
9,963,302 shares of beneficial interest outstanding) $11.12
Maximum offering price per share (net asset value plus sales charge of 4.75% of offering price) $11.67
-------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $1,808,895 and 162,838 shares of beneficial interest outstanding) $11.11
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------
STATEMENT OF OPERATIONS For the Year Ended December 31, 1993
<C> <S> <C>
- -------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME Interest $8,145,735
- -------------------------------------------------------------------------------------------------------------------
EXPENSES Management fees--Note 4 555,430
---------------------------------------------------------------------------------------
Distribution assistance:
Class A--Note 4 279,190
Class B--Note 4 6,089
---------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 171,164
---------------------------------------------------------------------------------------
Shareholder reports 98,061
---------------------------------------------------------------------------------------
Custodian fees and expenses 26,144
---------------------------------------------------------------------------------------
Legal and auditing fees 13,774
---------------------------------------------------------------------------------------
Trustees' fees and expenses 6,398
---------------------------------------------------------------------------------------
Registration and filing fees:
Class A 4,542
Class B 582
---------------------------------------------------------------------------------------
Other 29,281
-----------
Total expenses 1,190,655
- -------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 6,955,080
- -------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED Net realized gain on investments 3,772,429
GAIN ON INVESTMENTS ---------------------------------------------------------------------------------------
Net change in unrealized appreciation on investments:
Beginning of year 2,693,891
End of year--Note 3 2,716,124
-----------
Net change 22,233
-----------
Net realized and unrealized gain on investments 3,794,662
- -------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $10,749,742
-----------
-----------
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
-------------------------
1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
OPERATIONS Net investment income $6,955,080 $6,898,017
------------------------------------------------------------------------------------------------------
Net realized gain on investments 3,772,429 2,881,367
------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 22,233 (3,303,621)
------------ ------------
Net increase in net assets resulting from operations 10,749,742 6,475,763
- ----------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS Dividends from net investment income:
Class A ($.707 and $.763 per share, respectively) (7,067,709) (7,002,468)
Class B ($.420 per share) (33,652) --
- ----------------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST Net increase in net assets resulting from Class A beneficial interest
TRANSACTIONS transactions--Note 2 802,199 16,193,234
------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from Class B beneficial interest
transactions--Note 2 1,828,205 --
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS Total increase 6,278,785 15,666,529
------------------------------------------------------------------------------------------------------
Beginning of year 106,289,600 90,623,071
------------ ------------
End of year (including (overdistributed) undistributed net investment
income of ($56,074) and $90,207, respectively) $112,568,385 $106,289,600
------------ ------------
------------ ------------
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
CLASS A
---------------------------------------------------------------------------
ELEVEN
YEAR MONTHS
ENDED ENDED
DEC. 31, DEC. 31,
1993 1992 1991(3) 1990 1989 1988(2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $10.74 $10.80 $9.86 $10.29 $10.12 $10.55
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .69 .75 .82 .88(4) .92 .93
Net realized and unrealized
gain (loss) on investments .40 (.05) .90 (.43) .19 (.36)
------ ------ ------ ------ ------ ------
Total income from investment
operations 1.09 .70 1.72 .45 1.11 .57
- ----------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.71) (.76) (.78) (.88) (.94) (1.00)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.12 $10.74 $10.80 $9.86 $10.29 $10.12
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
- ----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(5) 10.30% 6.77% 18.28% 4.74% 11.31%
4.48%
- ----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $110,759 $106,290 $90,623 $87,021 $96,380 $102,293
- ----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $111,702 $98,672 $86,471 $90,065 $100,891 $111,264
- ----------------------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 9,963 9,899 8,390 8,829 9,369 10,108
- ----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 6.20% 7.00% 8.02% 8.85% 8.85% 8.75%
Expenses 1.06% 1.10% 1.23% 1.24%(4) 1.14% 1.05%
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 110.1% 116.4% 97.1% 80.4% 41.3% 45.0%
<CAPTION>
Class B
- -------------------------------------------------------------------------------------------------------- --------
PERIOD
ENDED
YEAR ENDED JANUARY 31, DEC. 31,
1988(2) 1987(2) 1986(2) 1985(2) 1984(2) 1993(1)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $11.30 $11.16 $10.91 $11.00 $11.07 $11.10
- ----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 1.09 1.16 1.22 1.27 1.28 .40
Net realized and unrealized
gain (loss) on investments (.55) .22 .35 (.04) (.03) .03
-------- -------- -------- -------- -------- --------
Total income from investment
operations .54 1.38 1.57 1.23 1.25 .43
- ----------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (1.29) (1.24) (1.32) (1.32) (1.32) (.42)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.55 $11.30 $11.16 $10.91 $11.00 $11.11
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
- ----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(5) N/A N/A N/A N/A N/A 3.91%
- ----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $118,568 $125,513 $121,979 $117,293 $116,193 $1,809
- ----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $118,724 $123,045 $118,253 $111,235 $115,058 $922
- ----------------------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 11,234 11,103 10,930 10,751 10,563 163
- ----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 10.28% 10.45% 11.26% 12.21% 11.69% 4.80%(6)
Expenses .98% .93% .97% 1.01% .99% 1.90%(6)
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 19.5% 59.8% 36.5% 76.7% 49.9% 110.1%
<FN>
1. For the period from May 1, 1993 (inception of offering) to December 31, 1993.
2. Operating results prior to April 15, 1988 were achieved by the Fund's
predecessor corporation as a closed-end fund under different investment
objectives and policies. Such results are thus not necessarily representative of
operating results the Fund may achieve under its current investment objectives
and policies.
3. On March 28, 1991, Oppenheimer Management Corporation became the investment
advisor to the Fund.
4. Net investment income would have been $.87 absent the voluntary expense
limitation, resulting in an expense ratio of 1.26%.
5. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions reinvested
in additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales charges
are not reflected in the total returns.
6. Annualized.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the year
ended December 31, 1993 were $123,943,358 and $134,301,656, respectively.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SIGNIFICANT Oppenheimer Investment Grade Bond Fund (the Fund) is
ACCOUNTING POLICIES a separate fund of Oppenheimer Integrity Funds, a
diversified, open-end management investment company
registered under the Investment Company Act of 1940,
as amended. The Fund's investment advisor is
Oppenheimer Management Corporation (the Manager). The
Fund offers both Class A and Class B shares. Class A
shares are sold with a front-end sales charge. Class
B shares may be subject to a contingent deferred
sales charge. Both classes of shares have identical
rights to earnings, assets and voting privileges,
except that each class has its own distribution plan,
expenses directly attributable to a particular class
and exclusive voting rights with respect to matters
affecting a single class. Class B shares will
automatically convert to Class A shares six years
after the date of purchase. The following is a
summary of significant accounting policies
consistently followed by the Fund.
-----------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued
at 4:00 p.m. (New York time) on each trading day.
Long-term debt securities are valued by a portfolio
pricing service approved by the Board of Trustees.
Long-term debt securities which cannot be valued by
the approved portfolio pricing service are valued by
averaging the mean between the bid and asked prices
obtained from two active market makers in such
securities. Short-term debt securities having a
remaining maturity of 60 days or less are valued at
cost (or last determined market value) adjusted for
amortization to maturity of any premium or discount.
Securities for which market quotes are not readily
available are valued under procedures established by
the Board of Trustees to determine fair value in good
faith.
-----------------------------------------------------
ALLOCATION OF INCOME, EXPENSES AND GAINS AND LOSSES.
Income, expenses (other than those attributable to a
specific class) and gains and losses are allocated
daily to each class of shares based upon the relative
proportion of net assets represented by such class.
Operating expenses directly attributable to a
specific class are charged against the operations of
that class.
-----------------------------------------------------
FEDERAL INCOME TAXES. The Fund intends to continue to
comply with provisions of the Internal Revenue Code
applicable to regulated investment companies and to
distribute all of its taxable income, including any
net realized gain on investments not offset by loss
carryovers, to shareholders. Therefore, no federal
income tax provision is required. At December 31,
1993, the Fund had available for federal income tax
purposes an unused capital loss carryover of
approximately $1,400,000, $442,000 of which will
expire in 1997, and $958,000 in 1998.
-----------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to
declare dividends separately for Class A and Class B
shares from net investment income each regular
business day and pay such dividends monthly.
Distributions from net realized gains on investments,
if any, will be declared at least once each year.
-----------------------------------------------------
OTHER. Investment transactions are accounted for on
the date the investments are purchased or sold (trade
date). Discount on securities purchased is amortized
over the life of the respective securities, in
accordance with federal income tax requirements.
Realized gains and losses on investments and
unrealized appreciation and depreciation are
determined on an identified cost basis, which is the
same basis used for federal income tax purposes.
11 Oppenheimer Investment Grade Bond Fund
<PAGE>
------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
2. SHARES OF The Fund has authorized an unlimited number of no
BENEFICIAL INTEREST par value shares of beneficial interest of each
class. Transactions in shares of beneficial interest
were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993(1) YEAR ENDED DECEMBER 31,
1992
------------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 2,953,788 $33,325,053 2,484,198 $26,675,262
Dividends reinvested 259,953 2,897,712 216,393 2,318,129
Redeemed (3,149,098) (35,420,566) (1,191,950) (12,800,157)
---------- ----------- ---------- -----------
Net increase 64,643 $802,199 1,508,641 $16,193,234
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
Class B:
Sold 195,606 $ 2,198,191 -- $ --
Dividends reinvested 2,293 25,726 -- --
Redeemed (35,061) (395,712) -- --
---------- ----------- ---------- -----------
Net increase 162,838 $ 1,828,205 -- $ --
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
<FN>
1. For the year ended December 31, 1993 for Class A shares and for the period
from May 1, 1993 (inception of offering) to December 31, 1993 for Class B
shares.
</TABLE>
- --------------------------------------------------------------------------------
3. UNREALIZED GAINS AND At December 31, 1993, net unrealized appreciation on
LOSSES ON INVESTMENTS investments of $2,716,124 was composed of gross
appreciation of $3,957,810, and gross depreciation of
$1,241,686.
- --------------------------------------------------------------------------------
4. MANAGEMENT FEES Management fees paid to the Manager were in
AND OTHER TRANSACTIONS accordance with the investment advisory agreement
WITH AFFILIATES with the Fund which provides for an annual fee of
.50% on the first $100 million of net assets with a
reduction of .05% on each $200 million thereafter, to
.35% on net assets in excess of $500 million. The
Manager has agreed to reimburse the Fund if aggregate
expenses (with specified exceptions) exceed the most
stringent applicable regulatory limit on Fund
expenses.
For the year ended December 31, 1993,
commissions (sales charges paid by investors) on
sales of Class A shares totaled $269,639, of which
$163,271 was retained by Oppenheimer Funds
Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by an affiliated
broker/dealer. During the year ended December 31,
1993, OFDI received contingent deferred sales charges
of $350 upon redemption of Class B shares.
Oppenheimer Shareholder Services (OSS), a
division of the Manager, is the transfer and
shareholder servicing agent for the Fund, and for
other registered investment companies. OSS's total
costs of providing such services are allocated
ratably to these companies.
Under separate approved plans of distribution,
each class may expend up to .25% of its net assets
annually to reimburse OFDI for costs incurred in
distributing shares of the Fund, including amounts
paid to brokers, dealers, banks and other
institutions. In addition, Class B shares are subject
to an asset-based sales charge of .75% of net assets
annually, to reimburse OFDI for sales commissions
paid from its own resources at the time of sale and
associated financing costs. In the event of
termination or discontinuance of the Class B plan of
distribution, the Fund would be contractually
obligated to pay OFDI for any expenses not previously
reimbursed or recovered through contingent deferred
sales charges. During the year ended December 31,
1993, OFDI paid $181,032 to an affiliated
broker/dealer as reimbursement for Class A
distribution-related expenses and retained $6,089 as
reimbursement for Class B distribution-related
expenses and sales commissions.
- --------------------------------------------------------------------------------
5. DEFERRED TRUSTEE A former trustee elected to defer receipt of fees
COMPENSATION earned. These deferred fees earn interest at a rate
determined by the current Board of Trustees at the
beginning of each calendar year, compounded each
quarter-end. As of December 31, 1993, the Fund was
incurring interest at a rate of 6.01% per annum.
Deferred fees are payable in annual installments,
with accrued interest, each April 1 through 1995.
<PAGE>
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Sub-Adviser
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche
1560 Broadway
Denver, Colorado 80202
Legal Counsel
Myer, Swanson & Adams, P.C.
1600 Broadway
Denver, Colorado 80202-4918
<PAGE>
<PAGE>
Oppenheimer
Value Stock Fund
Prospectus dated 5/1/94
Oppenheimer Value Stock Fund (the "Fund") is a mutual fund with the
investment objective of seeking long-term growth of capital and income
primarily through investments in stocks of well established companies.
You should carefully review the risks associated with an investment in the
Fund.
The Fund offers two classes of shares: (1) Class A shares, which are
sold at a public offering price that includes a front-end sales charge,
and (2) Class B shares, which are sold without a front-end sales charge,
although you may pay a sales charge when you redeem your shares, depending
on how long you own them. Class B shares are also subject to an annual
"asset-based sales charge." Each class of shares bears different
expenses. In deciding which class of shares to buy, you should consider
how much you plan to purchase, how long you plan to keep your shares, and
other factors discussed in "How to Buy Shares" starting on page 11.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and keep it
for future reference. You can find more detailed information about the
Fund in the May 1, 1994, Statement of Additional Information. For a free
copy, call Oppenheimer Shareholder Services, the Fund's Transfer Agent,
at 1-800-525-7048, or write to the Transfer Agent at the address on the
back cover. The Statement of Additional Information has been filed with
the Securities and Exchange Commission and is incorporated into this
Prospectus by reference (which means that it is legally part of this
Prospectus).
Shares of the Fund are not deposits or obligations of any bank, nor
are they guaranteed by any bank are not insured by the F.D.I.C. or any
other agency, and involve investment risks, including the possible loss
of principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Contents
ABOUT THE FUND
Expenses
Financial Highlights
Investment Objective and Policies
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange
Plans
Reinvestment Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
<PAGE>
ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other services and
these expenses are reflected in the Fund's net asset value per share. As
a shareholder, you pay these expenses indirectly. Shareholders pay other
expenses directly, such as sales charges. The following tables are
provided to help you understand your direct expenses of investing in the
Fund and your share of the Fund's operating expenses you might expect to
bear indirectly. The calculations are based on the Fund's expenses during
its fiscal year ended December 31, 1993.
- Shareholder Transaction Expenses are charges you pay when you buy
or sell shares of the Fund. Please refer to pages ____ through _____ for
an explanation of how and when these charges apply.
Class A Shares Class B Shares
-------------- --------------
Maximum Sales Charge on Purchases
(as a % of offering price) 5.75% None
Sales Charge on Reinvested Dividends None None
Deferred Sales Charge
(as a % of the lower of the original
purchase price or redemption proceeds) None(1) 5% in the
first year,
declining to
1% in the
sixth year and
eliminated
thereafter
Exchange Fee $5.00 $5.00**
(1) If you invest more than $1 million in Class A shares, you may have
to pay a sales charge of up to 1% if you sell your shares within 18
calendar months from the end of the calendar month during which you
purchased those shares. See "How to Buy Shares - Class A Shares," below.
- Annual Fund Operating Expenses are paid out of the Fund's assets
and represent the Fund's expenses in operating its business. For example,
the Fund pays management fees to its investment adviser, Oppenheimer
Management Corporation (the "Manager") and other regular expenses for
services, such as transfer agent fees, custodial fees paid to the bank
that holds its portfolio securities, audit fees and legal and other
expenses. The following numbers are projections of the Fund's business
expenses based on the Fund's expenses in its last fiscal year. These
amounts are shown as a percentage of the average net assets of each class
of the Fund's shares for that year. The "12b-1 Distribution Plan Fees"
for Class A shares are the Service Plan Fees (which are a maximum of 0.25%
of average annual net assets of that class), and for Class B shares, are
the Service Plan Fees (maximum of 0.25%) and the asset-based sales charge
of 0.75%. The actual expense numbers for each class of shares in future
years may be more or less, depending on a number of factors, including the
actual amount of the assets represented by each class of shares. Class
B shares were not publicly sold before May 1, 1993. Therefore, the Annual
Fund Operating Expenses shown for Class B shares are based on expenses for
the period from May 1, 1993 through December 31, 1993.
Class A Shares Class B Shares
-------------- --------------
Management Fees 0.75% 0.75%
12b-1 Distribution Plan Fees 0.25% 1.00%
(includes Shareholder Service Plan Fees)
Other Expenses 0.24% 0.39%
Total Fund Operating Expenses 1.24% 2.14%
- Examples. To try to show the effect of the expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make a $1,000 investment in each class of shares
of the Fund, and that the Fund's annual return is 5%, and that its
operating expenses for each class are the ones shown in the chart above.
If you were to redeem your shares at the end of each period shown below,
your investment would incur the following expenses by the end of each
period shown:
1 year 3 years 5 years 10 years*
------ ------- ------- ---------
Class A Shares $69 $95 $122 $99
Class B Shares $72 $97 $135 $203
If you did not redeem your investment, it would incur the following
expenses:
Class A Shares $69 $95 $122 $199
Class B Shares $22 $67 $115 $203
* The Class B expenses in years 7 through 10 are based on the Class A
expenses shown above, because the Fund automatically converts your Class
B shares into Class A shares after 6 years. Long-term Class B shareholders
could pay the economic equivalent of more than the maximum front-end sales
charge allowed under applicable regulations, because of the effect of the
asset-based sales charge and contingent deferred sales charge. The
automatic conversion is designed to minimize the likelihood that this will
occur. Please refer to "How to Buy Shares - Class B Shares" for more
information.
These examples show the effect of expenses on an investment, but it
is not meant to state or predict actual or expected costs or investment
returns of the Fund, all of which will vary.
<PAGE>
Financial Highlights
The table on this page presents selected financial information
about the Fund, including per share data and expense ratios and other data
based on the Fund's average net assets. This information has been audited
by Deloitte & Touche, the Fund's independent auditors, whose report on the
Fund's financial statements for the fiscal year ended December 31, 1993
is included in the Statement of Additional Information. The information
in the table for the fiscal periods prior to 1991 was audited by the
Fund's previous independent auditors. Class B shares were publicly
offered only during a portion of that period, commencing May 1, 1993.
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------------------------------------------------------- ------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1993 1992 1991(3) 1990 1989 1988 1987 1986(2) 1993(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of
period
- ------------------------------------------------------------------------------------------------------------------------------------
$14.19 $13.57 $11.39 $12.08 $10.47 $ 9.51 $9.98 $10.16 $14.60
Income (loss) from investment
operations:
Net investment income .29 .32 .33 .37 .40 .33 .34 .01 .17
Net realized and unrealized
gain (loss) on investments .98 .97 2.49 (.57) 1.87 1.15 (.22) (.19) .51
------- ------ ------ ------ ------ ------ ------ ------ ---------
Total income (loss) from
investment operations 1.27 1.29 2.82 (.20) 2.27 1.48 .12 (.18) .68
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net
investment income (.29) (.32) (.33) (.39) (.41) (.33) (.41) -- (.17)
Distributions from net realized
gain on investments (.76) (.35) (.31) (.10) (.25) (.19) (.18) -- (.76)
------- ------ ------ ------ ------ ------ ------ ------ ---------
Total dividends and distributions
to shareholders (1.05) (.67) (.64) (.49) (.66) (.52) (.59) -- (.93)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.41 $14.19 $13.57 $11.39 $12.08 $10.47 $9.51 $ 9.98 $14.35
------- ------ ------ ------ ------ ------ ------ ------ ---------
------- ------ ------ ------ ------ ------ ------ ------ ---------
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(4) 8.97% 9.61% 25.23% (1.53)% 21.93% 15.61% 1.10% (1.77)%
4.63%
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $90,470 $59,376 $49,381 $40,153 $37,713 $27,434 $19,377 $20,162 $5,158
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $80,229 $53,485 $45,581 $39,104 $33,742 $24,658 $22,322 (2) $2,527
- ------------------------------------------------------------------------------------------------------------------------------------
Number of shares outstanding at
end of period (in thousands) 6,280 4,184 3,639 3,526 3,122 2,620 2,039 2,021 359
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 1.97% 2.34% 2.59% 3.22% 3.51% 3.45% 3.15% (2) .97%(5)
Expenses, before voluntary
reimbursement 1.24% 1.19% 1.31% 1.36% 1.40% 1.21% .70% (2) 2.14%(5)
Expenses, net of voluntary
reimbursement N/A N/A 1.26% 1.30% 1.30% 1.19% N/A (2) N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 24.3% 12.3% 14.5% 13.5% 14.9% 13.1% 10.8% (2) 24.3%
<FN>
1. For the period from May 1, 1993 (inception of offering) to December 31, 1993.
2. For the period from December 22, 1986 to December 31, 1986. Ratios during
this development period would not be indicative of representative results.
3. On March 28, 1991, Oppenheimer Management Corporation became the investment
advisor to the Fund.
4. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions reinvested
in additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales charges
are not reflected in the total returns.
5. Annualized.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the year
ended December 31, 1993 were $25,469,747 and $17,554,755, respectively.
</TABLE>
<PAGE>
Investment Objective and Policies
Objective. The Fund seeks long-term growth of capital and income
primarily through investments in stocks of well established companies.
Investment Policies and Strategies. In seeking its investment
objective the Fund will invest, under normal market conditions, in a
diversified portfolio of (i) common stocks that pay cash dividends, (ii)
securities convertible into common stocks, and (iii) other equity
securities issued by companies with a market capitalization of at least
$500 million or with a history of at least five years of operations as a
public company, and which are listed on a national securities exchange or
traded in the over-the-counter markets. The Fund will invest primarily
in cash dividend-paying stocks. To provide liquidity or for temporary
defensive purposes, the Fund may invest all or any portion of its assets
in high-quality, short-term money market instruments.
Concert Capital Management, Inc. (the "Sub-Adviser") will seek
to invest in the securities of companies which, in its opinion, are of
high quality, offer above-average dividend growth potential and are
attractively valued in the marketplace. This would include stocks selling
below their historical price/earnings ranges relative to the Standard &
Poor's 500 Stock Index or below their historical price/book value ranges.
The Sub-Adviser will give strong consideration to securities of companies
whose current prices do not adequately reflect, in its opinion, the
ongoing business value of the enterprise.
The Fund may try to hedge against losses in the value of its
portfolio securities by using hedging strategies described below. The
Sub-Adviser may employ special investment techniques, also described
below. Additional information about the securities the Fund may invest
in, the hedging strategies the Fund may employ and the special investment
techniques may be found under the same headings in the Statement of
Additional Information.
- Investment Risks. Because of the types of companies the Fund
invests in and the investment techniques the Fund uses, some of which may
be speculative, the Fund is designed for those investors who are investing
for the long-term and who are willing to accept greater risks of loss of
their capital in the hope of achieving capital appreciation. Investing
for capital appreciation entails the risk of loss of all or part of your
principal. There is no assurance that the Fund will achieve its
objective, and when you redeem your shares, they may be worth more or less
than what you paid for them.
- Portfolio Turnover. While it is a policy of the Fund
generally not to engage in trading for short-term gains, portfolio changes
will be made without regard to the length of time a security has been held
or whether a sale would result in a profit or loss, if in the Sub-
Adviser's judgment, such transactions are advisable in light of the
circumstances of a particular company or within a particular industry or
in light of market, economic or financial conditions. Higher levels of
portfolio activity generally result in higher transaction costs and may
also result in taxes on realized capital gains to be borne by the Fund's
shareholders. See "Financial Highlights" above, "Dividends, Capital Gains
and Taxes" below and "Brokerage Policies of the Fund" in the Statement of
Additional Information.
- Can the Fund's Investment Objective and Policies Change? The
Fund has an investment objective, which is described above, as well as
investment policies it follows to try to achieve its objective.
Additionally, the Fund uses certain investment techniques and strategies
in carrying out those policies. The Fund's investment policies and
practices are not "fundamental" unless the Prospectus or Statement of
Additional Information says that a particular policy is "fundamental."
Fundamental policies are those that cannot be changed without the
approval of a "majority" of the Fund's outstanding voting shares. The term
"majority" is defined in the Investment Company Act to be a particular
level of vote by outstanding voting shares (and this term is explained in
the Statement of Additional Information). The Fund's investment objective
is a fundamental policy. The Fund's Board of Trustees may change non-
fundamental policies without shareholder approval, although significant
changes will be described in amendments to this Prospectus.
Securities of Foreign Governments and Companies. The Fund may invest
in debt and equity securities issued or guaranteed by foreign companies,
and debt securities of foreign governments or their agencies. These
foreign securities may include debt obligations such as government bonds,
debentures issued by companies, as well as notes. Some of these debt
securities may have variable interest rates or "floating" interest rates
that change in different market conditions. Those changes will affect the
income the Fund receives. These securities are described in more detail
in the Statement of Additional Information.
The Fund is not restricted in the amount of its assets it may
invest in foreign countries or in which countries. However, if the Fund's
assets are held abroad, the countries in which they are held and the sub-
custodians holding them must be approved by the Fund's Board of Trustees.
The Fund may buy or sell foreign currencies and foreign currency
forward contracts (agreements to exchange one currency for another at a
future date) to hedge currency risks and to facilitate transactions in
foreign investments. Although currency forward contracts can be used to
protect the Fund from adverse exchange rate changes, there is a risk of
loss if the Sub-Adviser fails to predict currency exchange movements
correctly.
- Risks of Foreign Securities. Investing in foreign securities,
especially those issued in underdeveloped countries, generally involves
special risks. For example, foreign issuers are not subject to the same
accounting and disclosure requirements that U.S. companies are subject to.
The value of foreign investments may be affected by changes in foreign
currency rates, exchange control regulations, expropriation or
nationalization of a company's assets, foreign taxes, delays in settlement
of transactions, changes in governmental economic or monetary policy in
the U.S. or abroad, or other political and economic factors. If the Fund
distributes more income during a period than it earns because of
unfavorable currency exchange rates, those dividends may later have to be
considered a return of capital. More information about the risks and
potential rewards of foreign securities is contained in the Statement of
Additional Information.
Other Investment Techniques and Strategies. The Fund may also use the
investment techniques and strategies described below, which involve
certain risks. The Statement of Additional Information contains more
detailed information about these practices, including limitations designed
to reduce some of the risks.
- Writing Covered Calls. The Fund may write (i.e., sell)
covered call options ("calls") only if certain conditions are met: (1) the
calls must be listed on a domestic or foreign securities exchange or over-
the-counter, and (2) each call must be "covered" while it is outstanding;
that is, the Fund must own the securities on which the call is written or
it must own other securities that are acceptable for the escrow
arrangements required for calls. If a covered call written by the Fund
is exercised on a security that has increased in value, the Fund will be
required to sell the security at the call price and will not be able to
realize any profit on the security above the call price.
- Hedging With Options and Futures Contracts. The Fund may buy
and sell options and futures contracts to manage its exposure to changing
interest rates, securities prices and currency exchange rates. Some of
these strategies, such as selling futures, buying puts and writing calls,
hedge the Fund's portfolio against price fluctuations. Other hedging
strategies, such as buying futures, writing puts and buying calls, tend
to increase market exposure. The put and call options which the Fund may
purchase and sell are exchange-traded or over-the-counter options. The
Fund may invest in futures, where the securities which underlie such
contracts are permissible investments for the Fund, and index-based
futures contracts which are appropriately correlated with the Fund's
portfolio. The Fund may purchase and sell call and put options on futures
contracts, and the Fund may engage in related closing transactions with
respect to such options on futures contracts. The Fund may also invest
in interest rate swap transactions. All of these are referred to as
"hedging instruments." The initial margin deposits for futures contracts
and premiums paid for related options may not exceed 5% of the value of
the Fund's total assets. Writing puts requires the segregation of liquid
assets to cover the put. The Fund does not use futures and options on
futures for speculative purposes.
Hedging instruments can be volatile investments and may involve
certain risks. If the Sub-Adviser uses a hedging instrument at the wrong
time or judges market conditions incorrectly, hedging strategies may
reduce the Fund's return. The Fund could also experience losses if the
prices of its futures and options positions were not correlated with its
other investments or if it could not close out a position because of an
illiquid market for the future or option. Interest rate swaps are subject
to credit risks (if the other party fails to meet its obligations) and
also to interest rate risks, because the Fund could be obligated to pay
more under its swap agreements than it receives under them, as a result
of interest rate changes.
Options trading involves the payment of premiums and has special
tax effects on the Fund. There is also special risks in particular
hedging strategies. For example, in writing puts, there is a risk that
the Fund may be required to buy the underlying security at a
disadvantageous price. These risks and the hedging strategies the Fund
may use are described in greater detail in the Statement of Additional
Information.
- Illiquid and Restricted Securities. Under the policies and
procedures established by the Fund's Board of Trustees, the Manager
determines the liquidity of the Fund's investments. Investments may be
illiquid because of the absence of an active trading market, making it
difficult to value them or dispose of them promptly at an acceptable
price. A restricted security is one that has a contractual restriction
on its resale or which cannot be sold publicly until it is registered
under the Securities Act of 1933. The Fund will not invest more than 10%
of its net assets in illiquid or restricted securities (that limit may
increase to 15% if certain state laws are changed or the Fund's shares are
no longer sold in those states). Certain restricted securities, eligible
for resale to qualified institutional purchasers, are not subject to that
limit.
- Loans of Portfolio Securities. The Fund may lend its
portfolio securities amounting to not more than 25% of its total assets
to brokers, dealers and other financial institutions, subject to certain
conditions described in the Statement of Additional Information. The Fund
presently does not intend to lend its portfolio securities, but if it
does, the value of securities loaned is not expected to exceed 5% of the
value of the Fund's total assets in the coming year.
- Repurchase Agreements. The Fund may enter into repurchase
agreements. There is no limit on the amount of the Fund's net assets that
may be subject to repurchase agreements of seven days or less. The Fund
will not enter into repurchase agreements that will cause more than 15%
of the Fund's net assets to be subject to repurchase agreements maturing
in more than seven days. Repurchase agreements must be fully
collateralized. However, if the vendor of the securities under a
repurchase agreement fails to pay the resale price on the delivery date,
the Fund may incur costs in disposing of the collateral and may experience
losses if there is any delay in its ability to do so.
- Forward Commitments. The Fund may enter into contracts to
purchase securities for a fixed price at a specified future date beyond
customary settlement time ("forward commitments"). Forward commitments
involve a risk of loss if the value of the security to be purchased
declines prior to the settlement date, which risk is in addition to the
risk of decline in value of the Fund's other assets. The Fund may realize
short-term gains or losses upon the sale of forward commitments.
- "When-Issued" and Delayed Delivery Transactions. The Fund may
purchase securities on a "when-issued" basis and may purchase or sell
securities on a "delayed delivery" basis. These terms refer to securities
that have been created and for which a market exists, but which are not
available for immediate delivery. There may be a risk of loss to the Fund
if the value of the security declines prior to the settlement date.
Other Investment Restrictions. The Fund has other investment
restrictions which are "fundamental" policies.
Under these fundamental policies, the Fund cannot do any of the
following: (1) make short sales except for sales "against the box"; (2)
borrow money or enter into reverse repurchase agreements, except that the
Fund may borrow money from banks and enter into reverse repurchase
agreements as a temporary measure for extraordinary or emergency purposes
(but not for the purpose of making investments), provided that the
aggregate amount of all such borrowings and commitments under such
agreements does not, at the time of borrowing or of entering into such an
agreement, exceed 10% of the Fund's total assets taken at current market
value; the Fund will not purchase additional portfolio securities at any
time that the aggregate amount of its borrowings and its commitments under
reverse repurchase agreements exceeds 5% of the Fund's net assets (for
purposes of this restriction, entering into portfolio lending agreements
shall not be deemed to constitute borrowing money); (3) concentrate its
investments in any particular industry except that it may invest up to 25%
of the value of its total assets in the securities of issuers of any one
industry (of the utility companies, gas, electric, water and telephone
will each be considered as a separate industry); and (4) buy securities
issued or guaranteed by any one issuer (except the U.S. Government or any
of its agencies or instrumentalities) if with respect to 75% of its total
assets (a) more than 5% of the Fund's total assets would be invested in
the securities of such issuer, or (b) the Fund would own more than 10% of
that issuer's voting securities.
All of the percentage restrictions described above and elsewhere
in this Prospectus apply only at the time the Fund purchases a security,
and the Fund need not dispose of a security merely because the Fund's
assets have changed or the security has increased in value relative to the
size of the Fund. There are other fundamental policies discussed in the
Statement of Additional Information.
How the Fund is Managed
Organization and History. Oppenheimer Integrity Funds (the "Trust") was
organized in 1982 as a multi-series Massachusetts business trust and the
Fund is a series of that Trust. That Trust is an open-end, diversified
management investment company, with an unlimited number of authorized
shares of beneficial interest. Each of the two series of the Trust is a
fund that issues its own shares, has its own investment portfolio, and its
own assets and liabilities.
The Fund is governed by a Board of Trustees, which is responsible
for protecting the interests of shareholders under Massachusetts law. The
Trustees meet periodically throughout the year to oversee the Fund's
activities, review its performance, and review the actions of the Manager.
"Trustees and Officers of the Fund" in the Statement of Additional
Information names the Trustees and provides more information about them
and the officers of the Fund. Although the Fund is not required by law
to hold annual shareholder meetings, it may hold meetings from time to
time on important matters, and shareholders have the right to call a
meeting to remove a Trustee or to take other action described in the
Trust's Declaration of Trust.
The Board of Trustees has the power, without shareholder
approval, to divide unissued shares of the Fund into two or more classes.
Each class has its own dividends and distributions, and pays certain
expenses which may be different for the different classes. Each class may
have a different net asset value. The Board has done so, and the Fund
currently has two classes of shares, Class A and Class B. Each share has
one vote at shareholder meetings, with fractional shares voting
proportionally. Only shares of a class vote together on matters that
affect that class alone. Shares are freely transferrable.
The Manager and Its Affiliates. Since March 28, 1991, the Fund has
been managed by the Manager, which handles its day-to-day business. The
Manager carries out its duties, subject to the policies established by the
Board of Trustees, under an Investment Advisory Agreement which states the
Manager's responsibilities and its fees, and describes the expenses that
the Fund pays to conduct its business. The Manager has entered into a
contract with Concert Capital Management, Inc. ("Concert Capital"), an
indirect wholly-owned subsidiary of Massachusetts Mutual Life Insurance
Company, to act as the Fund's Sub-Adviser. The Sub-Adviser is responsible
for choosing the Fund's investments and its duties and responsibilities
are set forth in the contract with the Manager. The Manager, not the
Fund, pays the Sub-Adviser.
The Manager has operated as an investment adviser since 1959.
The Manager and its affiliates currently manage investment companies,
including other OppenheimerFunds, with assets of more than $27 billion as
of December 31, 1993, and with more than 1.8 million shareholder accounts.
The Manager is owned by Oppenheimer Acquisition Corp., a holding company
that is owned in part by senior officers of the Manager and controlled by
MassMutual. The Sub-Adviser was created by MassMutual in 1982 and is
provided business services by it. The Sub-Adviser and MassMutual advise
investment companies and institutional clients.
- Portfolio Manager. The Portfolio Manager of the Fund (who is
also a Vice President of the Fund) is David B. Salerno, a Managing
Director of the Sub-Adviser. He has been responsible for the day-to-day
management of the Fund's portfolio since its inception in 1982. Mr.
Salerno also serves as a Senior Vice President of MML Series Investment
Fund.
- Fees and Expenses. Under the Investment Advisory Agreement,
the Fund pays the Manager the following annual fees, which decline on
additional assets as the Fund grows: 0.75% of the first $100 million of
the Fund's average annual net assets, 0.72% of the next $200 million,
0.69% of the next $200 million, and 0.66% of net assets in excess of $500
million. The Fund's management fee for its last fiscal year was 0.75% of
average annual net assets for Class A shares and 0.75% for Class B shares.
Under the Sub-Advisory Agreement, the Manager pays the Sub-
Advisor the following annual fees, which decline on additional assets as
the Fund grows: 0.40% of the first $50 million of the Fund's average
annual net assets and 0.20% of net assets in excess of $50 million.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal and auditing
costs. Those expenses are paid out of the Fund's assets and are not paid
directly by shareholders. However, those expenses reduce the net asset
value of shares, and therefore are indirectly borne by shareholders
through their investment. More information about the investment advisory
agreement and the other expenses paid by the Fund is contained in the
Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of
Additional Information. That section discusses how brokers and dealers
are selected for the Fund's portfolio transactions. The Fund usually uses
brokers when buying portfolio securities. When deciding which brokers to
use, the Investment Advisory Agreement allows the Manager to consider
whether brokers have sold shares of the Fund or any other funds for which
the Manager or the Sub-Adviser or their affiliates exercise investment
discretion.
- The Distributor. The Fund's shares are sold through dealers
and brokers that have a sales agreement with Oppenheimer Funds
Distributor, Inc., a subsidiary of the Manager that acts as the
Distributor. The Distributor also distributes the shares of other mutual
funds managed by the Manager (the "OppenheimerFunds") and is sub-
distributor for funds managed by a subsidiary of the Manager.
- The Transfer Agent. The Fund's transfer agent is Oppenheimer
Shareholder Services, a division of the Manager, which acts as the
shareholder servicing agent for the Fund and the other OppenheimerFunds
on an "at-cost" basis. Shareholders should direct inquiries about their
accounts to the Transfer Agent at the address and toll-free numbers shown
below in this Prospectus or on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses certain terms
to illustrate its performance. These terms are used to show the
performance of each class of shares separately, because the performance
of each class of shares will usually be different, as a result of the
different kinds of expenses each class bears. This performance
information may be useful to help you see how well your investment has
done and to compare it to other funds or market indices, as we have done
below.
It is important to understand that the Fund's total returns
represent past performance and should not be considered to be predictions
of future returns or performance. This performance data is described
below, but more detailed information about how total returns are
calculated is contained in the Statement of Additional Information, which
also contains information about other ways to measure and compare the
Fund's performance. The Fund's investment performance will vary, depending
on market conditions, the composition of the portfolio, expenses and which
class of shares you purchase.
- Total Returns. There are different types of "total returns"
used to measure the Fund's performance. Total return is the change in
value of a hypothetical investment in the Fund over a given period,
assuming that all dividends and capital gains distributions are reinvested
in additional shares. The cumulative total return measures the change in
value over the entire period (for example, ten years). An average annual
total return shows the average rate of return for each year in a period
that would produce the cumulative total return over the entire period.
However, average annual total returns do not show the Fund's actual year-
by-year performance.
When total returns are quoted for Class A shares, they reflect
the payment of the maximum initial sales charge. Total returns may also
be quoted "at net asset value," without considering the effect of the
sales charge, and those returns would be reduced if sales charges were
deducted. When total returns are shown for a one-year period for Class B
shares, they reflect the effect of the contingent deferred sales charge.
They may be also shown based just on the change in net asset value,
without considering the effect of the contingent deferred sales charge.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year ended December 31, 1993,
followed by a graphical comparison of the Fund's performance to an
appropriate broad-based market index.
- Management's Discussion of Performance. Throughout most of
1993 the U.S. economy continued to grow slowly and interest rates declined
steadily. In that environment, the Manager identified opportunities for
growth by investing in high-quality companies that were in the process of
restructuring their operations to focus on core businesses. The Fund has
realized substantial gains from its investments in value stocks -- stocks
whose prices have dropped below their perceived normal valuations and
holding them until the Manager believes they have fully realized their
true value.
- Comparing the Fund's Performance to the Market. The chart
below shows the performance of a hypothetical $10,000 investment in each
Class of shares of the Fund held until December 31, 1993; in the case of
Class A shares, since inception of the class on December 26, 1986, and in
the case of Class B shares, from the inception of the Class on May 1,
1993, with all dividends and capital gains distributions reinvested in
additional shares. The graph reflects the deduction of the 5.75% maximum
initial sales charge on Class A shares and the maximum 5% contingent
deferred sales charge on Class B shares.
Because the Fund invests in equity securities of well established
companies, the Fund's performance is compared to the performance of the
S&P 500 Index, an unmanaged index of 500 widely-held common stocks traded
on the New York and American Stock Exchanges and the over-the-counter
market. It is widely recognized as a general measure of stock market
performance. It includes a factor for the reinvestment of dividends but
does not reflect expenses or taxes. Index performance reflects
reinvestment of income but not capital gains or transaction costs, and
none of the data below shows the effect of taxes. Also, the Fund's
performance data reflects the effect of Fund business and operating
expenses. While index comparisons may be useful to provide a benchmark
for the Fund's performance, it must be noted that the Fund's investments
are not limited to the securities in any one index and the index data does
not reflect any assessment of the risk of the investments included in the
index.
Oppenheimer Value Stock Fund
Comparison of Change in Value
of $10,000 Hypothetical Investment to
S&P 500 Index
(Graph)
Past Performance is not predictive of future performance.
Oppenheimer Value Stock Fund
Average Annual Total Return at 12/31/93
1 Year 5 Year Life*
------ ------ -----
Class A: 2.70% 11.10% 9.92%
Cumulative Total Return at 12/31/93
Class B: -0.37%**
_____________________________
* The Fund (Class A shares) began operations on 12/22/86
** Class B shares of the Fund first publicly offered on 5/1/93
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund offers investors two different classes of
shares. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and will
likely have different share prices.
- Class A Shares. If you buy Class A shares, you pay an initial
sales charge (on investments up to $1 million). If you purchase Class A
shares as part of an investment of at least $1 million in shares of one
or more OppenheimerFunds, and you sell any of those shares within 18
months after your purchase, you will pay a contingent deferred sales
charge, which will vary depending on the amount you invested.
- Class B Shares. If you buy Class B shares, you pay no sales
charge at the time of purchase, but if you sell your shares within six
years, you will normally pay a contingent deferred sales charge that
varies depending on how long you own your shares.
Which Class of Shares Should You Choose? Once you decide that the Fund
is an appropriate investment for you, the decision as to which class of
shares is better suited to your needs depends on a number of factors which
you should discuss with your financial advisors:
- How Much Do You Plan To Invest? If you plan to invest a
substantial amount, the reduced sales charges available for larger
purchases of Class A shares may be more beneficial to you, and for
purchases over $1 million, the contingent deferred sales charge on Class
A shares may be more beneficial. The Distributor will not accept any order
for $1 million or more for Class B shares on behalf of a single investor
for that reason.
- How Long Do You Expect To Hold Your Investment? While future
financial needs cannot be predicted with certainty, investors who prefer
not to pay an initial sales charge and who plan to hold their shares for
more than five years might consider Class B shares. Investors who plan to
redeem shares before the end of five years might prefer Class A shares.
- Are There Differences In Account Features That Matter To You?
Because some account features may not be available for Class B
shareholders, such as checkwriting, you should carefully review how you
plan to use your investment account before deciding which class of shares
is better for you. Additionally, the dividends payable to Class B
shareholders will be reduced by the additional expenses borne solely by
that class, such as the asset-based sales charge to which Class B shares
are subject, as described below and in the Statement of Additional
Information.
- How Does It Affect Payments To My Broker? A salesperson or any
other person who is entitled to receive compensation for selling Fund
shares may receive different compensation for selling one class than for
selling another class. It is important that investors understand that the
purpose of the contingent deferred sales charge and asset-based sales
charge for Class B shares is the same as the purpose of the front-end
sales charge on sales of Class A shares.
How Much Must You Invest? You can open a Fund account with a minimum
initial investment of $1,000 and make additional investments at any time
with as little as $25. There are reduced minimum investments under special
investment plans:
- With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7)
custodial plans and military allotment plans, you can make initial and
subsequent investments for as little as $25; and subsequent purchases of
at least $25 can be made by telephone through AccountLink.
- Under pension and profit-sharing plans and Individual Retirement
Accounts (IRAs), you can make an initial investment of as little as $250
(if your IRA is established under an Asset Builder Plan, the $25 minimum
applies), and subsequent investments may be as little as $25.
- There is no minimum investment requirement if you are buying
shares by reinvesting dividends from the Fund or other OppenheimerFunds
(a list of them appears in the Statement of Additional Information, or you
can ask your dealer or call the Transfer Agent), or by reinvesting
distributions from unit investment trusts that have made arrangements with
the Distributor.
How Are Shares Purchased? You can buy shares several ways -- through any
dealer, broker or financial institution that has a sales agreement with
the Distributor, or directly through the Distributor, or automatically
from your bank account through an Asset Builder Plan under the
OppenheimerFunds AccountLink service. When you buy shares, be sure to
specify Class A or Class B shares. If you do not choose, your investment
will be made in Class A shares.
- Buying Shares Through Your Dealer. Your dealer will place your
order with the Distributor on your behalf.
- Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "Oppenheimer Funds Distributor, Inc." Mail it to P.O. Box 5270,
Denver, Colorado 80217. If you don't list a dealer on the application,
the Distributor will act as your agent in buying the shares.
- Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or
other financial institution that is an Automated Clearing House (ACH)
member, to transmit funds electronically to purchase shares, to send
redemption proceeds, and to transmit dividends and distributions. Shares
are purchased for your account on the regular business day the Distributor
is instructed by you to initiate the ACH transfer to buy shares. You can
provide those instructions automatically, under an Asset Builder Plan,
described below, or by telephone instructions using OppenheimerFunds
PhoneLink, also described below. You must request AccountLink privileges
on the application or dealer settlement instructions used to establish
your account. Please refer to "AccountLink," below for more details.
- At What Price Are Shares Sold? Shares are sold at the public
offering price based on the net asset value that is next determined after
the Distributor receives the purchase order in Denver. In most cases, to
receive that day's offering price, the Distributor must receive your order
by 4:00 P.M., New York time (all references to time in this Prospectus
mean "New York time."). The net asset value of each class of shares is
determined as of that time on each day The New York Stock Exchange is open
(which is a "regular business day"). If you buy shares through a dealer,
the dealer must receive your order by 4:00 P.M., on a regular business day
and transmit it to the Distributor so that it is received before the
Distributor's close of business that day, which is normally 5:00 P.M. The
Distributor may reject any purchase order for the Fund's shares, in its
sole discretion.
- Asset Builder Plans. You may purchase shares of the Fund (and up
to four other OppenheimerFunds) automatically each month from your account
at a bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of
Additional Information.
Class A Shares. Class A shares are sold at their offering price, which
is normally net asset value plus an initial sales charge. However, in
some cases, described below, where purchases are not subject to an initial
sales charge, the offering price may be net asset value. In some cases,
reduced sales charges may be available, as described below. When you
invest, the Fund receives the net asset value for your account. The sales
charge varies depending on the amount of your purchase and a portion may
be retained by the Distributor and allocated to your dealer. The current
sales charge rates and commissions paid to dealers and brokers are as
follows:
<TABLE>
<CAPTION>
Front-End Front-End
Sales Charge Sales Charge Commission
as Percentage as Approximate as Percentage
of Offering Percentage of of Offering
Amount of Purchase Price Amount Invested Price
- ------------------ ------------- --------------- -------------
<S> <C> <C> <C>
Less than $25,000 5.75% 6.10% 4.75%
$25,000 or more but
less than $50,000 5.50% 5.82% 4.75%
$50,000 or more but
less than $100,00 4.75% 4.99% 4.00%
$100,000 or more but
less than $250,000 3.75% 3.90% 3.00%
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
- ------------------------
The Distributor reserves the right to reallow the entire commission to
dealers. If that occurs, the dealer may be considered an "underwriter"
under Federal securities laws.
</TABLE>
- Class A Contingent Deferred Sales Charge. There is no initial
sales charge on purchases of Class A shares of any one or more
OppenheimerFunds aggregating $1 million or more. However, the Distributor
pays dealers of record commissions on such purchases in an amount equal
to the sum of 1.0% of the first $2.5 million, plus 0.50% of the next $2.5
million, plus 0.25% of share purchases over $5 million. However, that
commission will be paid only on the amount of those purchases in excess
of $1 million that were not previously subject to a front-end sales charge
and dealer commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge
(called the "Class A contingent deferred sales charge") will be deducted
from the redemption proceeds. That sales charge will be equal to 1.0% of
the aggregate net asset value of either (1) the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate commissions the Distributor paid to your dealer on all Class A
shares of all OppenheimerFunds you purchased subject to the Class A
contingent deferred sales charge. In determining whether a contingent
deferred sales charge is payable, the Fund will first redeem shares that
are not subject to the sales charge, including shares purchased by
reinvestment of dividends and capital gains, and then will redeem other
shares in the order that you purchased them. The Class A contingent
deferred sales charge is waived in certain cases described in "Waivers of
Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges
of shares under the Fund's Exchange Privilege (described below). However,
if the shares acquired by exchange are redeemed within 18 months of the
end of the calendar month of the purchase of the exchanged shares, the
sales charge will apply.
- Special Arrangements With Dealers. The Distributor may advance
up to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients. Dealers whose sales of Class A shares of OppenheimerFunds (other
than money market funds) under OppenheimerFunds-sponsored 403(b)(7)
custodial plans exceed $5 million per year (calculated per quarter), will
receive monthly one-half of the Distributor's retained commissions on
those sales, and if those sales exceed $10 million per year, those dealers
will receive the Distributor's entire retained commission on those sales.
The Distributor sponsors an annual sales conference to which a dealer firm
is eligible to send, with a guest, a registered representative who sells
more than $2.5 million of Class A shares of OppenheimerFunds (other than
money market funds) in a calendar year, or the dealer may, at its option,
receive the equivalent cash value of that award as additional commission.
Reduced Sales Charges for Class A Share Purchases. You may be eligible
to buy Class A shares at reduced sales charge rates in one or more of the
following ways:
- Right of Accumulation. You and your spouse can cumulate Class A
shares you purchase for your own accounts, or jointly, or on behalf of
your children who are minors, under trust or custodial accounts. A
fiduciary can cumulate shares purchased for a trust, estate or other
fiduciary account (including one or more employee benefit plans of the
same employer) that has multiple accounts.
Additionally, you can cumulate current purchases of Class A shares
of the Fund and other OppenheimerFunds with Class A shares of
OppenheimerFunds you previously purchased subject to a sales charge,
provided that you still hold your investment in one of the
OppenheimerFunds; the value of those shares will be based on the greater
of the amount you paid for the shares or their current value (at offering
price). The OppenheimerFunds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Transfer Agent. The reduced sales charge will apply only to current
purchases and must be requested when you buy your shares.
- Letter of Intent. Under a Letter of Intent, you may purchase
Class A shares of the Fund and other OppenheimerFunds during a 13-month
period at the reduced sales charge rate that applies to the aggregate
amount of the intended purchases, including purchases made up to 90 days
before the date of the Letter. More information is contained in the
Application and in "Reduced Sales Charges" in the Statement of Additional
Information.
- Waivers of Class A Sales Charges. No sales charge is imposed on
sales of Class A shares to the following investors: (1) the Manager or its
affiliates; (2) present or former officers, directors, trustees and
employees (and their "immediate families" as defined in "Reduced Sales
Charges" in the Statement of Additional Information) of the Fund, the
Manager and its affiliates, and retirement plans established by them for
their employees; (3) registered management investment companies, or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose; (4) dealers or brokers that
have a sales agreement with the Distributor, if they purchase shares for
their own accounts or for retirement plans for their employees; (5)
employees and registered representatives (and their spouses) of dealers
or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and are identified
to the Distributor) or with the Distributor; the purchaser must certify
to the Distributor at the time of purchase that the purchase is for the
purchaser's own account (or for the benefit of such employee's spouse or
minor children); (6) dealers, brokers or registered investment advisers
that have entered into an agreement with the Distributor providing
specifically for the use of shares of the Fund in particular investment
products made available to their clients.
Additionally, no sales charge is imposed on shares that are (a)
issued in plans of reorganization, such as mergers, asset acquisitions and
exchange offers, to which the Fund is a party or (b) purchased by the
reinvestment of loan repayments by a participant in a retirement plan for
which the Manager or its affiliates acts as sponsor, or (c) purchased by
the reinvestment of dividends or other distributions reinvested from the
Fund or other OppenheimerFunds (other than the Cash Reserves Funds) or
unit investment trusts for which reinvestment arrangements have been made
with the Distributor. There is a further discussion of this policy in
"Reduced Sales Charges" in the Statement of Additional Information.
The Class A contingent deferred sales charge is also waived if shares
are redeemed in the following cases: (1) retirement distributions or loans
to participants or beneficiaries from qualified retirement plans, deferred
compensation plans or other employee benefit plans ("Retirement Plans"),
(2) returns of excess contributions made to Retirement Plans, (3)
Automatic Withdrawal Plan payments that are limited to no more than 12%
of the original account value annually, and (4) involuntary redemptions
of shares by operation of law or under the procedures set forth in the
Fund's Declaration of Trust or adopted by the Board of Trustees.
- Service Plan for Class A Shares. The Fund has adopted a Service
Plan for Class A shares to reimburse the Distributor for a portion of its
costs incurred in connection with the personal service and maintenance of
accounts that hold Class A shares. Reimbursement is made quarterly at an
annual rate that may not exceed 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor uses all of those fees to
compensate dealers, brokers, banks and other financial institutions
quarterly for providing personal service and maintenance of accounts of
their customers that hold Class A shares and to reimburse itself (if the
Fund's Board of Trustees authorizes such reimbursements, which it has not
yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor.
Payments are made by the Distributor quarterly at an annual rate not to
exceed 0.25% of the average annual net assets of Class A shares held in
accounts of the dealer or its customers. The payments under the Plan
increase the annual expenses of Class A shares. For more details, please
refer to "Distribution and Service Plans" in the Statement of Additional
Information.
Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed
within 6 years of their purchase, a contingent deferred sales charge will
be deducted from the redemption proceeds. That sales charge will not
apply to shares purchased by the reinvestment of dividends or capital
gains distributions. The charge will be assessed on the lesser of the net
asset value of the shares at the time of redemption or the original
purchase price. The contingent deferred sales charge is not imposed on the
amount of your account value represented by the increase in net asset
value over the initial purchase price (including increases due to the
reinvestment of dividends and capital gains distributions). The Class B
contingent deferred sales charge is paid to the Distributor to reimburse
its expenses of providing distribution-related services to the Fund in
connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 6 years, and (3) shares held the longest during the
6-year period.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
Contingent Deferred Sales Charge
Years Since Purchase Payment on Redemptions in that Year
Was Made (As % of Amount Subject to Charge)
- ---------------------------- ----------------------------------
0 - 1 5.0%
1 - 2 4.0%
2 - 3 3.0%
3 - 4 3.0%
4 - 5 2.0%
5 - 6 1.0%
6 and following None
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of the
month in which the purchase was made.
- Waivers of Class B Sales Charge. The Class B contingent deferred
sales charge will be waived if the shareholder requests it for any of the
following redemptions: (1) distributions to participants or beneficiaries
from Retirement Plans, if the distributions are made (a) under an
Automatic Withdrawal Plan after the participant reaches age 59-1/2, as
long as the payments are no more than 10% of the account value annually
(measured from the date the Transfer Agent receives the request), or (b)
following the death or disability (as defined in the Internal Revenue
Code) of the participant or beneficiary; (2) redemptions from accounts
other than Retirement Plans following the death or disability of the
shareholder (you must provide evidence of a determination of disability
by the Social Security Administration), and (3) returns of excess
contributions to Retirement Plans.
The contingent deferred sales charge is also waived on Class B shares
in the following cases: (i) shares sold to the Manager or its affiliates;
(ii) shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or
the Distributor for that purpose; (iii) shares issued in plans of
reorganization to which the Fund is a party; and (iv) shares redeemed in
involuntary redemptions as described above. Further details about this
policy are contained in "Reduced Sales Charges" in the Statement of
Additional Information.
- Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to Class
A shares. This conversion feature relieves Class B shareholders of the
asset-based sales charge that applies to Class B shares under the Class
B Distribution Plan, described below. The conversion is based on the
relative net asset value of the two classes, and no sales load or other
charge is imposed. When Class B shares convert, any other Class B shares
that were acquired by the reinvestment of dividends and distributions on
the converted shares will also convert to Class A shares. The conversion
feature is subject to the continued availability of a tax ruling described
in "Alternative Sales Arrangements - Class A and Class B Shares" in the
Statement of Additional Information.
- Distribution and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to compensate
the Distributor for its services and costs in distributing Class B shares
and servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class B shares that
are outstanding for 6 years or less. The Distributor also receives a
service fee of 0.25% per year. Both fees are computed on the average
annual net assets of Class B shares, determined as of the close of each
regular business day. The asset-based sales charge allows investors to buy
Class B shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell Class B shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class B shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class B expenses by up to 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class B shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 3.75% of the
purchase price to dealers from its own resources at the time of sale. The
Distributor retains the asset-based sales charge to recoup the sales
commissions it pays, the advances of service fee payments it makes, and
its financing costs.
Because the Distributor's actual expenses in selling Class B shares
may be more than payments it receives from contingent deferred sales
charges collected on redeemed shares and from the Fund under the
Disstribution and Service Plan for Class B shares, those expenses may be
carried over and paid in future years. At December 31, 1993, the end of
the Plan year, the Distributor had incurred unreimbursed expenses under
the Plan of $219,470 (equal to 4.3% of the Fund's net assets represented
by Class B shares on that date), which have been carried over into the
present Plan year. If the Plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the asset-based sales
charge to the Distributor for certain expenses it incurred before the Plan
was terminated.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send
money electronically between those accounts to perform a number of types
of account transactions, including purchases of shares by telephone
(either through a service representative or by PhoneLink, described
below), automatic investments under Asset Builder Plans, and sending
dividends and distributions or Automatic Withdrawal Plan payments directly
to your bank account. Please refer to the Application for details or call
the Transfer Agent for more information.
AccountLink privileges must be requested on the Application you use
to buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can
request AccountLink privileges on signature-guaranteed instructions to the
Transfer Agent. AccountLink privileges will apply to each shareholder
listed in the registration on your account as well as to your dealer
representative of record unless and until the Transfer Agent receives
written instructions terminating or changing those privileges. After you
establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the
Transfer Agent signed by all shareholders who own the account.
- Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase shares
in amounts up to $250,000 through a telephone representative, call the
Distributor at 1-800-852-8457. The purchase payment will be debited from
your bank account.
- PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account
transactions automatically using a touch-tone phone. PhoneLink may be used
on already-established Fund accounts after you obtain a Personal
Identification Number (PIN), by calling the special PhoneLink number: 1-
800-533-3310.
- Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund, to pay for
these purchases.
- Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your
Fund account to another OppenheimerFunds account you have already
established by calling the special PhoneLink number. Please refer to "How
to Exchange Shares," below, for details.
- Selling Shares. You can redeem shares by telephone automatically
by calling the PhoneLink number and the Fund will send the proceeds
directly to your AccountLink bank account. Please refer to "How to Sell
Shares," below for details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that
enable you to sell shares automatically or exchange them to another
OppenheimerFunds account on a regular basis:
- Automatic Withdrawal Plans. If your Fund account is $5,000 or
more, you can establish an Automatic Withdrawal Plan to receive payments
of at least $50 on a monthly, quarterly, semi-annual or annual basis. The
checks may be sent to you or sent automatically to your bank account on
AccountLink. You may even set up certain types of withdrawals of up to
$1,500 per month by telephone. You should consult the Application and
Statement of Additional Information for more details.
- Automatic Exchange Plans. You can authorize the Transfer Agent to
exchange an amount you establish in advance automatically for shares of
up to five other OppenheimerFunds on a monthly, quarterly, semi-annual or
annual basis under an Automatic Exchange Plan. The minimum purchase for
each other OppenheimerFunds account is $25. These exchanges are subject
to the terms of the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Fund shares,
you have up to 6 months to reinvest all or part of the redemption proceeds
in Class A shares of the Fund or other OppenheimerFunds without paying
sales charge. This privilege applies to Class A shares that you sell, and
Class B shares on which you paid a contingent deferred sales charge when
you redeemed them. You must be sure to ask the Distributor for this
privilege when you send your payment. Please consult the Statement of
Additional Information for more details.
Retirement Plans. Fund shares are available as an investment for your
retirement plans. If you participate in a plan sponsored by your employer,
the plan trustee or administrator must make the purchase of shares for
your retirement plan account. The Distributor offers a number of different
retirement plans that can be used by individuals and employers:
- Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
- 403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
- SEP-IRAs and SAR-SEPs (Simplified Employee Pension Plans) for small
business owners or people with income from self-employment
- Pension and Profit-Sharing Plans for self-employed persons and
small business owners
Please call the Distributor for the OppenheimerFunds plan documents,
which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account on any regular
business day by selling (redeeming) some or all of your shares. Your
shares will be sold at the next net asset value calculated after your
order is received and accepted by the Transfer Agent. The Fund offers you
a number of ways to sell your shares: in writing or by telephone. You can
also set up Automatic Withdrawal Plans to redeem shares on a regular
basis, as described above. If you have questions about any of these
procedures, and especially if you are redeeming shares in a special
situation, such as due to the death of the owner, or from a retirement
plan, please call the Transfer Agent first, at 1-800-525-7048, for
assistance.
- Retirement Accounts. To sell shares in an OppenheimerFunds
retirement account in your name, call the Transfer Agent for a
distribution request form. There are special income tax withholding
requirements for distributions from retirement plans and you may be
required to submit a Withholding form with your request to avoid
delay. If your retirement plan account is held for you by your
employer, you must arrange for the distribution request to be sent
by the plan administrator or trustee. There are additional details
in the Statement of Additional Information.
- Certain Requests Require a Signature Guarantee. To protect you
and the Fund from fraud, certain redemption requests must be in writing
and must include a signature guarantee in the following situations (there
may be other situations also requiring a signature guarantee):
- You wish to redeem more than $50,000 worth of shares and receive
a check
- The check is not payable to all shareholders listed on the account
statement
- The check is not sent to the address of record on your statement
- Shares are being transferred to a Fund account with a different
owner or name
- Shares are redeemed by someone other than the owners (such as an
Executor)
- Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union
or savings association, or by a foreign bank that has a U.S.
correspondent bank, or by a U.S. registered dealer or broker in
securities, municipal securities or government securities, or from
a U.S. national securities exchange, a registered securities
association or a clearing agency. If you are signing as a
fiduciary or on behalf of a corporation, partnership or other
business, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
- Your name
- The Fund's name
- Your Fund account number (from your statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling, and
- Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell
shares.
Use the following address for requests by mail:
Oppenheimer Shareholder Services
P.O. Box 5270, Denver, Colorado 80217
Send courier or Express Mail requests to:
Oppenheimer Shareholder Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price
on a regular business day, your call must be received by the Transfer
Agent by 4:00 P.M. You may not redeem shares held in an OppenheimerFunds
retirement plan or under a share certificate by telephone.
- To redeem shares through a service representative, call 1-800-852-
8457
- To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address
on the account, or, if you have linked your Fund account to your bank
account on AccountLink, you may have the proceeds wired to that account.
- Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone, once in each 7-day period. The check must be payable to all
owners of record of the shares and must be sent to the address on the
account. This service is not available within 30 days of changing the
address on an account.
- Telephone Redemptions Through AccountLink. There are no dollar
limits on telephone redemption proceeds sent to a bank account designated
when you establish AccountLink. Normally the ACH wire to your bank is
initiated on the business day after the redemption. You do not receive
dividends on the proceeds of the shares you redeemed while they are
waiting to be wired.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
OppenheimerFunds at net asset value per share at the time of exchange,
without sales charge. A $5 service fee will be deducted from the fund
account you are exchanging into to help defray administrative costs. That
charge is waived for automated exchanges between already established
accounts on PhoneLink described below. To exchange shares, you must meet
several conditions:
- Shares of the fund selected for exchange must be available for
sale in your state of residence
- The prospectuses of this Fund and the fund whose shares you want
to buy must offer the exchange privilege
- You must hold the shares you buy when you establish your account
for at least 7 days before you can exchange them; after the
account is open 7 days, you can exchange shares every regular
business day
- You must meet the minimum purchase requirements for the fund you
purchase by exchange
- Before exchanging into a fund, you should obtain and read its
prospectus
Shares of a particular class may be exchanged only for shares of the
same class in the other OppenheimerFunds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present, not all of the OppenheimerFunds offer the same classes of shares.
If a fund has only one class of shares that does not have a class
designation, they are "Class A" shares for exchange purposes. In some
cases, sales charges may be imposed on exchange transactions. Certain
OppenheimerFunds offer Class A shares and either Class B or Class C
shares, and a list can be obtained by calling the Distributor at 1-800-
525-7048. Please refer to "How to Exchange Shares" in the Statement of
Additional Information for more details about this policy.
Exchanges may be requested in writing or by telephone:
- Written Exchange Requests. Submit an OppenheimerFunds Exchange
Request form, signed by all owners of the account. Send it to the
Transfer Agent at the addresses listed in "How to Sell Shares."
- Telephone Exchange Requests. Telephone exchange requests may be
made either by calling a service representative at 1-800-852-8457 or by
using PhoneLink for automated exchanges, by calling 1-800-533-3310.
Telephone exchanges may be made only between accounts that are registered
with the same names and address. Shares held under certificates may not
be exchanged by telephone.
You can obtain a list of eligible OppenheimerFunds in the Statement
of Additional Information or by calling the Transfer Agent at 1-800-525-
7048. Exchanges of shares involve a redemption of the shares of the fund
you own and a purchase of shares of the other fund.
There are certain exchange policies you should be aware of:
- Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business
day on which the Transfer Agent receives an exchange request by 4:00
P.M. that is in proper form, but either fund may delay the purchase
of shares of the fund you are exchanging into if it determines it
would be disadvantaged by a same-day transfer of the proceeds to buy
shares. For example, the receipt of multiple exchange requests from
a dealer in a "market-timing" strategy might require the disposition
of securities at a time or price disadvantageous to the Fund.
- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange
request that will disadvantage it, or to refuse multiple exchange
requests submitted by a shareholder or dealer.
- The Fund may amend, suspend or terminate the exchange privilege
at any time. Although the Fund will attempt to provide you notice
whenever it is reasonably able to do so, it may impose these changes
at any time.
- If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
Shareholder Account Rules and Policies
- Net Asset Value Per Share is determined for each class of shares
as of 4:00 P.M. each day The New York Stock Exchange is open by dividing
the value of the Fund's net assets attributable to a class by the number
of shares of that class that are outstanding. The Fund's Board of
Trustees has established procedures to value the Fund's securities to
determine net asset value. In general, securities values are based on
market value. There are special procedures for valuing illiquid and
restricted securities, securities for which market values cannot be
readily obtained, and call options and hedging instruments. These
procedures are described more completely in the Statement of Additional
Information.
- The offering of shares may be suspended during any period in which
the determination of net asset value is suspended, and the offering may
be suspended by the Board of Trustees at any time the Board believes it
is in the Fund's best interest to do so.
- Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any
time. If an account has more than one owner, the Fund and the Transfer
Agent may rely on the instructions of any one owner. Telephone privileges
apply to each owner of the account and the dealer representative of record
for the account unless and until the Transfer Agent receives cancellation
instructions from an owner of the account.
- The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not
use reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise it will not be liable for losses or expenses
arising out of telephone instructions reasonably believed to be genuine.
If you are unable to reach the Transfer Agent during periods of unusual
market activity, you may not be able to complete a telephone transaction
and should consider placing your order by mail.
- Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time
to time, the Transfer Agent in its discretion may waive certain of the
requirements for redemptions stated in this Prospectus.
- Dealers that can perform account transactions for their clients
by participating in NETWORKING through the National Securities Clearing
Corporation are responsible for obtaining their clients' permission to
perform those transactions and are responsible to their clients who are
shareholders of the Fund if the dealer performs any transaction
erroneously.
- The redemption price for shares will vary from day to day because
the value of the securities in the Fund's portfolio fluctuates, and the
redemption price, which is the net asset value per share, will normally
be different for Class A and Class B shares. Therefore, the redemption
value of your shares may be more or less than their original cost.
- Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the shareholder
under the redemption procedures described above) within 7 days after the
Transfer Agent receives redemption instructions in proper form, except
under unusual circumstances determined by the Securities and Exchange
Commission delaying or suspending such payments. The Transfer Agent may
delay forwarding a check or processing a payment via AccountLink for
recently purchased shares, but only until the purchase payment has
cleared. That delay may be as much as 15 days from the date the shares
were purchased. That delay may be avoided if you purchase shares by
certified check or arrange with your bank to provide telephone or written
assurance to the Transfer Agent that your purchase payment has cleared.
- Involuntary redemptions of small accounts may be made by the Fund
if the account value has fallen below $1,000 for reasons other than the
fact that the market value of shares has dropped, and in some cases
involuntary redemptions may be made to repay the Distributor for losses
from the cancellation of share purchase orders.
- Under unusual circumstances, shares of the Fund may be redeemed
"in kind," which means that the redemption proceeds will be paid with
securities from the Fund's portfolio. Please refer to the Statement of
Additional Information for more details.
- "Backup Withholding" of Federal income tax may be applied at the
rate of 31% from dividends, distributions and redemption proceeds
(including exchanges) if you fail to furnish the Fund a certified Social
Security or taxpayer identification number when you sign your application,
or if you violate Internal Revenue Service regulations on tax reporting
of dividends.
- The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be
avoided by redeeming your Fund shares directly through the Transfer Agent.
Under the circumstances described in "How To Buy Shares," you may be
subject to a contingent deferred sales charges when redeeming certain
Class A and Class B shares.
- To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report and
updated prospectus to shareholders having the same address on the Fund's
records. However, each shareholder may call the Transfer Agent at 1-800-
525-7048 to ask that copies of those materials be sent personally to that
shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A and
Class B shares from net investment income and pays such dividends to
shareholders quarterly. It is expected that distributions paid with
respect to Class A shares will generally be higher than for Class B shares
because expenses allocable to Class B shares will generally be higher.
Capital Gains. The Fund may make distributions annually in December
out of any net short-term or long-term capital gains, and the Fund may
make supplemental distributions of dividends and capital gains following
the end of its fiscal year. Long-term capital gains will be separately
identified in the tax information the Fund sends you after the end of the
year. Short-term capital gains are treated as dividends for tax purposes.
There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are reinvested.
For other accounts, you have four options:
- Reinvest All Distributions In The Fund. You can elect to reinvest
all dividends and long-term capital gains distributions in
additional shares of the Fund.
- Reinvest Capital Gains Only. You can elect to reinvest long-term
capital gains in the Fund while receiving dividends by check or
sent to your bank account on AccountLink.
- Receive All Distributions In Cash. You can elect to receive a
check for all dividends and long-term capital gains distributions
or have them sent to your bank on AccountLink.
- Reinvest Your Distributions In Another OppenheimerFunds Account.
You can reinvest all distributions in another OppenheimerFunds
account you have established.
Taxes. If your account is not a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the
Fund. Long-term capital gains are taxable as long-term capital gains when
distributed to shareholders. Dividends paid from short-term capital gains
and net investment income are taxable as ordinary income. Distributions
are subject to federal income tax and may be subject to state or local
taxes. Your distributions are taxable when paid, whether you reinvest
them in additional shares or take them in cash. Every year the Fund will
send you and the IRS a statement showing the amount of each taxable
distribution you received in the previous year.
- "Buying A Dividend": When a fund goes ex-dividend, its share
price is reduced by the amount of the distribution. If you buy
shares on or just before the ex-dividend date, or just before the
Fund declares a capital gains distribution, you will pay the full
price for the shares and then receive a portion of the price back as
a taxable dividend or capital gain.
- Taxes On Transactions: Share redemptions, including redemptions
for exchanges, are subject to capital gains tax. A capital gain or
loss is the difference between the price you paid for the shares and
the price you received when you sold them.
- Returns Of Capital: In certain cases distributions made by the
Fund may be considered a non-taxable return of capital to
shareholders. If that occurs, it will be identified in notices to
shareholders.
This information is only a summary of certain federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax
adviser about the effect of an investment in the Fund on your particular
tax situation.
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER VALUE STOCK FUND
Graphic material included in Prospectus of Oppenheimer Value Stock
Fund: "Comparison of Total Return of Oppenheimer Value Stock Fund with the
S&P 500 Index - Change in Value of a $10,000 Hypothetical Investment"
A linear graph will be included in the Prospectus of Oppenheimer Value
Stock Fund (the "Fund") depicting the initial account value and subsequent
account value of a hypothetical $10,000 investment in the Fund during each
of the Fund's fiscal years since December 31, 1986 to the end of each of
the Fund's most recently completed seven fiscal years (as to Class A
shares) and since May 1, 1993 (as to Class B shares) and comparing such
values with the same investments over the same time periods with the S&P
500 Index. Set forth below are the relevant data points that will appear
on the linear graph. Additional information with respect to the
foregoing, including a description of the S&P Index, is set forth in the
Prospectus under "Fund Performance Information - Management's Discussion
of Performance."
Oppenheimer
Fiscal Year Value Stock
(Period) Ended Fund A S&P 500 Index
- -------------- ----------- -------------
12/22/86 $ 9,425 $10,000
12/31/86 9,258 9,936
12/31/87 9,360 10,458
12/31/88 10,820 12,189
12/31/89 13,193 16,045
12/31/90 12,991 15,546
12/31/91 16,268 20,272
12/31/92 17,831 21,815
12/31/93 19,430 24,009
Oppenheimer
Fiscal Year Value Stock
(Period) Ended Fund B(1) S&P 500 Index
- -------------- ----------- -------------
5/1/93 $10,000 $10,000
12/31/93 9,963 10,525
- ----------------------
(1) Class B shares of the Fund were first publicly offered on May 1,
1993.
<PAGE>
Oppenheimer Value Stock Fund
3410 South Galena Street, Denver, CO 80231
Telephone: 1-800-525-7048
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Sub-Adviser Prospectus
Concert Capital Management, Inc.
125 High Street
Boston, Massachusetts 02110
Distributor OPPENHEIMER
Oppenheimer Funds Distributor, Inc. Value Stock Fund
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities Dated May 1, 1994
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche
1560 Broadway
Denver, Colorado 80202
Legal Counsel (OppenheimerFunds Logo)
Myer, Swanson & Adams, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, broker, salesperson or any other person has been authorized
to give any information or to make any representations other than those
contained in this Prospectus or the Statement of Additional Information,
and if given or made, such information and representations must not be
relied upon as having been authorized by the Fund, Oppenheimer Management
Corporation, Oppenheimer Funds Distributor, Inc., Concert Capital
Management, Inc., or any affiliate thereof. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of
the securities offered hereby in any state to any person to whom it is
unlawful to make such offer in such state.
PR326 (5/94) * Printed on recycled paper)
<PAGE>
Oppenheimer Value Stock Fund
3410 South Galena Street, Denver, CO 80231
Telephone: 1-800-525-7048
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Sub-Adviser Prospectus and
Concert Capital Management, Inc. New Account Application
125 High Street
Boston, Massachusetts 02110
Distributor OPPENHEIMER
Oppenheimer Funds Distributor, Inc. Value Stock Fund
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities Dated May 1, 1994
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche
1560 Broadway
Denver, Colorado 80202
Legal Counsel (OppenheimerFunds Logo)
Myer, Swanson & Adams, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, broker, salesperson or any other person has been authorized
to give any information or to make any representations other than those
contained in this Prospectus or the Statement of Additional Information,
and if given or made, such information and representations must not be
relied upon as having been authorized by the Fund, Oppenheimer Management
Corporation, Oppenheimer Funds Distributor, Inc., Concert Capital
Management, Inc., or any affiliate thereof. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of
the securities offered hereby in any state to any person to whom it is
unlawful to make such offer in such state.
PR325 (5/94) * Printed on recycled paper)
<PAGE>
OPPENHEIMER VALUE STOCK FUND
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
Statement of Additional Information dated May 1, 1994.
This Statement of Additional Information of Oppenheimer Value Stock
Fund is not a Prospectus. This document contains additional information
about the Fund and supplements information in the Prospectus dated May 1,
1994. It should be read together with the Prospectus which may be
obtained by writing to the Fund's Transfer Agent, Oppenheimer Shareholder
Services, at P.O. Box 5270, Denver, Colorado 80217 or by calling the
Transfer Agent at the toll-free number shown above.
Contents
Page
About the Fund 2
Investment Objective and Policies 2
Other Investment Techniques and Strategies 4
Other Investment Restrictions 12
How the Fund is Managed 13
Organization and History 13
Trustees and Officers of the Fund 14
The Manager and Its Affiliates 16
Brokerage Policies of the Fund 19
Performance of the Fund 21
Distribution and Service Plans 23
About Your Account 25
How to Buy Shares 25
How to Sell Shares 31
How to Exchange Shares 35
Dividends, Capital Gains and Taxes 37
Additional Information About the Fund 38
Independent Auditors' Report 40
Financial Statements 41
<PAGE>
ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and
policies of the Fund are discussed in the Prospectus. Set forth below is
supplemental information about those policies and the types of securities
in which the Fund invests, as well as the strategies the Fund may use to
try to achieve its objective. Capitalized terms used in this Statement
of Additional Information have the same meaning as those terms have in the
Prospectus.
The U.S. government obligations in which the Fund may invest as
described in the Prospectus include U.S. Treasury bills, notes and bonds
which are direct obligations of the U.S. government and debt obligations
issued, assumed, guaranteed or sponsored by agencies or instrumentalities
established under the authority of an Act of Congress, or obligations
secured by such securities.
The Fund may invest up to 5% of the value of its assets in warrants
in an effort to build a position in the underlying common stocks and, of
such 5%, no more than 2% may be invested in warrants that are not listed
on the New York Stock Exchange or the American Stock Exchange. A warrant
typically gives the holder the right to purchase underlying stock at a
specified price for a designated period of time. Warrants may be a
relatively volatile investment. The holder of a warrant takes the risk
that the market price of the underlying stock may never equal or exceed
the exercise price of the warrant. A warrant will expire without value
if it is not exercised or sold during its exercise period.
- Short-Term Debt Securities. The high-quality, short-term money
market instruments the Fund may invest in to provide liquidity or for
temporary defensive purposes include U.S. government obligations;
commercial paper which at the date of the investment is rated A-1 or A-2
by Standard & Poor's Corporation ("Standard & Poor's") or P-1 or P-2 by
Moody's Investors Service, Inc. ("Moody's") or, if unrated, is issued by
companies having an outstanding debt issue currently rated at least A by
Standard & Poor's or Moody's; short-term obligations of corporate issuers
which at the date of investment are rated AAA or AA by Standard & Poor's
or Aaa or Aa by Moody's; bank participation certificates, provided that
at the date of investment each of the underlying loans is made to an
issuer of securities rated at least A-2, AA or SP-2 by Standard & Poor's
or P-2 or Aa by Moody's, and also provided that the underlying loans have
a remaining maturity of one year or less; and certificates of deposit and
bankers' acceptances of banks and savings and loan associations.
- Securities of Foreign Governments and Companies. As stated in the
Prospectus, the Fund may invest in debt obligations and equity securities
(which may be dominated in U.S. dollars or non-U.S. currencies) issued or
guaranteed by foreign corporations, and debt obligations of certain
"supranational entities" (described below) and foreign governments or
their agencies or instrumentalities.
The percentage of the Fund's assets that will be allocated to foreign
securities will vary depending on the relative yields of foreign and U.S.
securities, the economies of foreign countries, the condition of such
countries' financial markets, the interest rate climate of such countries
and the relationship of such countries' currency to the U.S. dollar.
These factors are judged on the basis of fundamental economic criteria
(e.g., relative inflation levels and trends, growth rate forecasts,
balance of payments status, and economic policies) as well as technical
and political data.
Investments in foreign securities offer potential benefits not
available from investments solely in securities of domestic issuers, by
offering the opportunity to invest in foreign issuers that appear to offer
growth potential, or in foreign countries with economic policies or
business cycles different from those of the U.S., or to reduce
fluctuations in portfolio value by taking advantage of foreign bond or
other markets that do not move in a manner parallel to U.S. markets. From
time to time, U.S. government policies have discouraged certain
investments abroad by U.S. investors, through taxation or other
restrictions, and it is possible that such restrictions could be
reimposed.
Securities of foreign issuers that are represented by American
depository receipts, or that are listed on a U.S. securities exchange, or
are traded in the U.S. over-the-counter market are not considered "foreign
securities," because they are not subject to many of the special
considerations and risks (discussed below) that apply to foreign
securities traded and held abroad. If the Fund's portfolio securities are
held abroad, the countries in which such securities may be held and the
sub-custodians holding them must be approved by the Fund's Board of
Trustees under applicable SEC rules.
- Risks of Investing in Foreign Securities. Investment in foreign
securities involves considerations and risks not associated with
investment in securities of U.S. issuers. For example, foreign issuers
are not required to use generally-accepted accounting principles
("G.A.A.P."). If foreign securities are not registered under the
Securities Act of 1933, the issuer does not have to comply with the
disclosure requirements of the Securities Exchange Act of 1934. The
values of foreign securities investments will be affected by incomplete
or inaccurate information available as to foreign issuers, changes in
currency rates, exchange control regulations or currency blockage,
expropriation or nationalization of assets, application of foreign tax
laws (including withholding taxes), changes in governmental administration
or economic or monetary policy in the U.S. or abroad, or changed
circumstances in dealings between nations. In addition, it is generally
more difficult to obtain court judgments outside the United States. The
values of foreign securities will be affected by changes in currency rates
or exchange control regulations or currency blockage, application of
foreign tax laws, including withholding taxes, changes in governmental
administration or economic or monetary policy (in the U.S. or abroad) or
changed circumstances in dealings between nations. Costs will be incurred
in connection with conversions between various currencies. Foreign
brokerage commissions are generally higher than commissions in the U.S.,
and foreign securities markets may be less liquid, more volatile and less
subject to governmental regulation than in the U.S. Investments in foreign
countries could be affected by other factors not generally thought to be
present in the U.S., including expropriation or nationalization,
confiscatory taxation and potential difficulties in enforcing contractual
obligations, and could be subject to extended settlement periods.
The obligations of foreign governmental entities may or may not be
supported by the full faith and credit of a foreign government.
Obligations of "supranational entities" include those of international
organizations designated or supported by governmental entities to promote
economic reconstruction or development and of international banking
institutions and related government agencies. Examples include the
International Bank for Reconstruction and Development (the "World Bank"),
the European Coal and Steel Community, the Asian Development Bank and the
Inter-American Development Bank. The governmental members, or
"stockholders," usually make initial capital contributions to the
supranational entity and in many cases are committed to make additional
capital contributions if the supranational entity is unable to repay its
borrowings. Each supranational entity's lending activities are limited
to a percentage of its total capital (including "callable capital"
contributed by members at the entity's call), reserves and net income.
There is no assurance that foreign governments will be able or willing to
honor their commitments.
Because the Fund may purchase securities denominated in foreign
currencies, a change in the value of any such currency against the U.S.
dollar will result in a change in the U.S. dollar value of the Fund's
assets and its income available for distribution. In addition, although
a portion of the Fund's investment income may be received or realized in
foreign currencies, the Fund will be required to compute and distribute
its income in U.S. dollars, and absorb the cost of currency fluctuations.
The values of foreign investments and the investment income derived
from them may also be affected unfavorably by changes in currency exchange
control regulations. Although the Fund will invest only in securities
denominated in foreign currencies that at the time of investment do not
have significant government-imposed restrictions on conversion into U.S.
dollars, there can be no assurance against subsequent imposition of
currency controls. In addition, the values of foreign securities will
fluctuate in response to a variety of factors, including changes in U.S.
and foreign interest rates.
- Convertible Securities. While convertible securities are a form
of debt security in many cases, their conversion feature (allowing
conversion into equity securities) causes them to be regarded more as
"equity equivalents" so that the rating assigned to the security has less
impact on the investment decision than in the case of non-convertible
fixed income securities. To determine whether convertible securities
should be regarded as "equity equivalents," the Manager examines the
following factors: (1) whether, at the option of the investor, the
convertible security can be exchanged for a fixed number of shares of
common stock of the issuer, (2) whether the issuer of the convertible
securities has restated its earnings per share of common stock on a fully
diluted basis (considering the effect of conversion of the convertible
securities), and (3) the extent to which the convertible security may be
a defensive "equity substitute," providing the ability to participate in
any appreciation in the price of common stock.
Other Investment Techniques and Strategies
- Options on Securities. Special risks are associated with options
that are not traded on exchanges (i.e., those that are traded over-the-
counter). Closing transactions in over-the-counter options are effected
directly with a particular broker-dealer, rather than with an anonymous
third party on an exchange. Unlike closing transactions effected on an
exchange, a closing transaction of an over-the- counter option will not
actually extinguish the original option unless both the original option
transaction and the closing transaction are effected with the same broker-
dealer. Therefore, in an over-the-counter option transaction, the Fund
bears the risk that the broker-dealer effecting the closing transaction
will fail to meet its obligations. Also, in some circumstances, the Fund
may not be able to close an over-the-counter option. The Fund might then
have to exercise the option, and bear transaction costs on the exercise,
to realize any benefit from the option. If the Fund writes an over-the-
counter call option that it cannot close, it will have to retain the
underlying security until the option expires or is exercised. This would
limit the Fund's ability to realize a gain or avoid a loss if the value
of the underlying security changes while the option is still outstanding.
Also, over-the-counter options are not subject to the protections afforded
by the Options Clearing Corporation to purchasers of exchange-traded
options.
The staff of the Division of Investment Management of the Securities
and Exchange Commission (the "SEC") has taken the position that the
premiums that a fund pays for the purchase of over-the-counter options,
and the value of securities used to cover over-the-counter options written
by a fund, are illiquid securities. Accordingly, the Fund intends to
enter into over-the-counter options transactions only with primary dealers
in U.S. Government Securities and only pursuant to agreements that will
assure that the Fund will at all times have the right to repurchase the
option written by it from the dealer at a specified formula price.
The Fund will treat the amount by which such formula price exceeds
the intrinsic value of the option (i.e., the amount, if any, by which the
market price of the underlying security exceeds the exercise price of the
option) as an illiquid investment. It is the present policy of the Trust
not to enter into any over-the-counter option transaction if, as a result,
more than 15% of its net assets would be invested in (i) illiquid
investments (determined under the foregoing formula) relating to such
over-the-counter options written by the Fund, (ii) such over-the-counter
options purchased by the Fund, (iii) securities which are not readily
marketable, and (iv) repurchase agreements maturing in more than seven
days.
The Trustees have adopted a non-fundamental policy that the Fund may
write covered call options or write covered put options with respect to
not more than 5% of the value of its net assets. Similarly, the Fund may
only purchase call options and put options with a value of up to 5% of its
net assets.
A fund's purpose in writing covered options is to realize greater
income than would be realized on portfolio securities transactions alone.
The writing of options involves certain risks. During the option period,
the covered call writer has, in return for the premium on the option,
given up the opportunity to profit from a price increase in the underlying
securities above the exercise price, but, as long as its obligation as a
writer continues, has retained the risk of loss should the price of the
underlying security decline. A covered put writer assumes the risk that
the market price for the underlying security will fall below the exercise
price, in which case the writer could be required to purchase the security
at a higher price than the then current market price of the security. In
both cases, the writer has no control over the time when it may be
required to fulfill its obligation as a writer of the option. Once an
option writer has received an exercise notice, it cannot effect a closing
purchase transaction in order to terminate its obligation under the option
and must deliver or purchase the underlying securities at the exercise
price. A fund may forego the benefits of appreciation on securities sold
pursuant to call options or pay a higher price for securities acquired
pursuant to put options.
- Futures Contracts and Options on Futures Contracts. While futures
will be traded to reduce certain risks, futures trading itself entails
certain other risks. One risk arises due to the imperfect correlation
between movements in the price of the futures contracts and movements in
the price of the securities which are the subject of such contracts. In
addition, the market price of futures contracts may be affected by certain
factors, such as the closing out of futures contracts by investors through
offsetting transactions in order to avoid margin deposit and maintenance
requirements, and the participation of speculators in the futures market.
Another risk is that there may not be a liquid secondary market for a
given futures contract or at a given time, and in such event it may not
be possible for the Fund to close a futures position. Finally, successful
use of futures contracts by the Fund is subject to the ability of the
Fund's sub-adviser, Concert Capital Management, Inc. ("Concert Capital"),
to predict correctly movements in the direction of interest rates and
other factors affecting markets for securities. Thus, while the Fund may
benefit from the use of such contracts, the operation of these risk
factors may result in a poorer overall performance than if it had not
entered into any futures contracts.
Positions taken in the futures markets are not normally held to
maturity, but are instead liquidated through offsetting transactions which
may result in a profit or a loss. While futures positions taken by the
Fund will usually be liquidated in this manner, the Fund may instead make
or take delivery of the underlying securities whenever it appears
economically advantageous to do so.
- Interest Rate Swap Transactions. Swap agreements entail both
interest rate risk and credit risk. There is a risk that, based on
movements of interest rates in the future, the payments made by the Fund
under a swap agreement will have been greater than those received by it.
Credit risk arises from the possibility that the counterparty will
default. If the counterparty to an interest rate swap defaults, the
Fund's loss will consist of the net amount of contractual interest
payments that the Fund has not yet received. The Manager will monitor the
creditworthiness of counterparties to the Fund's interest rate swap
transactions on an ongoing basis. The Fund will enter into swap
transactions with appropriate counterparties pursuant to master netting
agreements. A master netting agreement provides that all swaps done
between the Fund and the counterparty under the master agreement shall be
regarded as parts of an integral agreement. If on any date amounts are
payable in the same currency in respect of one or more swap transactions,
the net amount payable on that date in that currency shall be paid. In
addition, the master netting agreement may provide that if one party
defaults generally or on one swap, the counterparty may terminate the
swaps with that party. Under such agreements, if there is a default
resulting in a loss to one party, the measure of that party's damages is
calculated by reference to the average cost of a replacement swap with
respect to each swap (i.e., the mark-to-market value at the time of the
termination of each swap). The gains and losses on all swaps are then
netted, and the result is the counterparty's gain or loss on termination.
The termination of all swaps and the netting of gains and losses on
termination is generally referred to as "aggregation."
- Additional Information About Hedging Instruments and Their Use.
The Fund's Custodian, or a securities depository acting for the Custodian,
will act as the Fund's escrow agent, through the facilities of the Options
Clearing Corporation ("OCC"), as to the investments on which the Fund has
written options traded on exchanges or as to other acceptable escrow
securities, so that no margin will be required for such transactions. OCC
will release the securities on the expiration of the option or upon the
Fund's entering into a closing transaction. An option position may be
closed out only on a market which provides secondary trading for options
of the same series, and there is no assurance that a liquid secondary
market will exist for any particular option.
When the Fund writes an over-the-counter ("OTC") option, it will
enter into an arrangement with a primary U.S. Government securities
dealer, which would establish a formula price at which the Fund would have
the absolute right to repurchase that OTC option. That formula price
would generally be based on a multiple of the premium received for the
option, plus the amount by which the option is exercisable below the
market price of the underlying security (that is, the extent to which the
option "is in-the-money"). When the Fund writes an OTC option, it will
treat as illiquid (for purposes of the limit on its assets that may be
invested in illiquid securities, stated in the Prospectus) the mark-to-
market value of any OTC option held by it. The Securities and Exchange
Commission ("SEC") is evaluating whether OTC options should be considered
liquid securities, and the procedure described above could be affected by
the outcome of that evaluation.
- Regulatory Aspects of Hedging Instruments. The Fund must operate
within certain restrictions as to its long and short positions in Futures
and options thereon under a rule (the "CFTC Rule") adopted by the
Commodity Futures Trading Commission (the "CFTC") under the Commodity
Exchange Act (the "CEA"), which excludes the Fund from registration with
the CFTC as a "commodity pool operator" (as defined under the CEA) if the
Fund complies with the CFTC Rule. Under these restrictions the Fund will
not, as to any positions, whether short, long or a combination thereof,
enter into Futures and options thereon for which the aggregate initial
margins and premiums exceed 5% of the fair market value of its total
assets, with certain exclusions as defined in the CFTC Rule. Under the
restrictions, the Fund also must, as to its short positions, use Futures
and options thereon solely for bona-fide hedging purposes within the
meaning and intent of the applicable provisions of the CEA.
Transactions in options by the Fund are subject to limitations
established by each of the exchanges governing the maximum number of
options which may be written or held by a single investor or group of
investors acting in concert, regardless of whether the options were
written or purchased on the same or different exchanges or are held in one
or more accounts or through one or more different exchanges or through one
or more brokers. Thus, the number of options which the Fund may write or
hold may be affected by options written or held by other entities,
including other investment companies having the same or an affiliated
investment adviser. Position limits also apply to Futures. An exchange
may order the liquidation of positions found to be in violation of those
limits and may impose certain other sanctions. Due to requirements under
the Investment Company Act, when the Fund purchases a Future, the Fund
will maintain, in a segregated account or accounts with its Custodian,
cash or readily-marketable, short-term (maturing in one year or less) debt
instruments in an amount equal to the market value of the securities
underlying such Future, less the margin deposit applicable to it.
- Tax Aspects of Covered Calls and Hedging Instruments. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code. That qualification enables the Fund to "pass through" its
income and realized capital gains to shareholders without the Fund having
to pay tax on them. This avoids a "double tax" on that income and capital
gains, since shareholders will be taxed on the dividends and capital gains
they receive from the Fund. One of the tests for the Fund's qualification
is that less than 30% of its gross income (irrespective of losses) must
be derived from gains realized on the sale of securities held for less
than three months. To comply with that 30% cap, the Fund will limit the
extent to which it engages in the following activities, but will not be
precluded from them: (i) selling investments, including Futures, held for
less than three months, whether or not they were purchased on the exercise
of a call held by the Fund; (ii) purchasing calls or puts which expire in
less than three months; (iii) effecting closing transactions with respect
to calls or puts written or purchased less than three months previously;
(iv) exercising puts or calls held by the Fund for less than three months;
or (v) writing calls on investments held for less than three months.
Certain foreign currency exchange contracts ("Forward Contracts") in
which the Fund may invest are treated as "section 1256 contracts." Gains
or losses relating to section 1256 contracts generally are characterized
under the Internal Revenue Code as 60% long-term and 40% short-term
capital gains or losses. However, foreign currency gains or losses
arising from certain section 1256 contracts (including Forward Contracts)
generally are treated as ordinary income or loss. In addition, section
1256 contracts held by the Fund at the end of each taxable year are
"marked-to-market" with the result that unrealized gains or losses are
treated as through they were realized. These contracts also may be
marked-to-market for purposes of the excise tax applicable to investment
company distributions and for other purposes under rules prescribed
pursuant to the Internal Revenue Code. An election can be made by the
Fund to exempt these transactions from this mark-to-market treatment.
Certain Forward Contracts entered into by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a position
making up a straddle is allowed only to the extent such loss exceeds any
unrecognized gain in the offsetting positions making up the straddle.
Disallowed loss is generally allowed at the point where there is no
unrecognized gain in the offsetting positions making up the straddle, or
the offsetting position is disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuation in exchange rates that occur between the time the Fund accrues
interest or other receivables or accrues expenses or other liabilities
denominated in a foreign currency and the time the Fund actually collects
such receivables or pays such liabilities generally are treated as
ordinary income or ordinary loss. Similarly, on disposition of debt
securities denominated in a foreign currency and on disposition of foreign
currency forward contracts, gains or losses attributable to fluctuations
in the value of a foreign currency between the date of acquisition of the
securities or contract and the date of disposition are also treated as
ordinary gain or loss. Currency gains and losses are offset against
market gains and losses before determining a net "Section 988" gain or
loss under the Internal Revenue Code, which may increase or decrease the
amount of the Fund's investment company income available for distribution
to its shareholders.
- Risks of Hedging With Options and Futures. In addition to the
risks with respect to hedging discussed in the Prospectus and above, there
is a risk in using short hedging by selling Futures to attempt to protect
against decline in value of the Fund's portfolio securities (due to an
increase in interest rates) that the prices of such Futures will correlate
imperfectly with the behavior of the cash (i.e., market value) prices of
the Fund's securities. The ordinary spreads between prices in the cash
and futures markets are subject to distortions due to differences in the
natures of those markets. First, all participants in the futures markets
are subject to margin deposit and maintenance requirements. Rather than
meeting additional margin deposit requirements, investors may close out
futures contracts through offsetting transactions which could distort the
normal relationship between the cash and futures markets. Second, the
liquidity of the futures markets depends on participants entering into
offsetting transactions rather than making or taking delivery. To the
extent participants decide to make or take delivery, liquidity in the
futures markets could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures
markets are less onerous than margin requirements in the securities
markets. Therefore, increased participation by speculators in the futures
markets may cause temporary price distortions.
If the Fund uses Hedging Instruments to establish a position in the
debt securities markets as a temporary substitute for the purchase of
individual debt securities (long hedging) by buying Futures and/or calls
on such Futures or on debt securities, it is possible that the market may
decline; if the Fund then concludes not to invest in such securities at
that time because of concerns as to possible further market decline or for
other reasons, the Fund will realize a loss on the Hedging Instruments
that is not offset by a reduction in the price of the debt securities
purchased.
- Repurchase Agreements. The Fund may acquire securities that are
subject to repurchase agreements, in order to generate income while
providing liquidity. In a repurchase transaction, the Fund acquires a
security from, and simultaneously resells it to, an approved vendor (a
U.S. commercial bank, U.S. branch of a foreign bank or a broker-dealer
which has been designated a primary dealer in government securities, which
must meet the credit requirements set by the Fund's Board of Trustees from
time to time), for delivery on an agreed upon future date. The sale price
exceeds the purchase price by an amount that reflects an agreed-upon
interest rate effective for the period during which the repurchase
agreement is in effect. The majority of these transactions run from day
to day, and delivery pursuant to resale typically will occur within one
to five days of the purchase. Repurchase agreements are considered
"loans" under the Investment Company Act, collateralized by the underlying
security. The Fund's repurchase agreements will require that at all times
while the repurchase agreement is in effect, the collateral's value must
equal or exceed the repurchase price to collateralize the repayment
obligation. Additionally, the Manager will impose creditworthiness
requirements to confirm that the vendor is financially sound and will
continuously monitor the collateral's value. If the vendor of a
repurchase agreement fails to pay the agreed-upon resale price on the
delivery date, the Fund's risks in such event may include any costs of
disposing of the collateral, and any loss from any delay in foreclosing
on the collateral. Additionally, the Sub-Adviser will monitor the
creditworthiness of the vendor.
- Illiquid and Restricted Securities. The Fund will not purchase
or otherwise acquire any security if, as a result, more than 10% of its
net assets (taken at current value) would be invested in securities that
are illiquid by virtue of the absence of a readily available market or
because of legal or contractual restrictions on resale ("restricted
securities"). As noted in the prospectus, that amount may, in the future,
increase to 15%. This policy applies to participation interests, bank
time deposits, master demand notes, repurchase transactions having a
maturity beyond seven days, over-the-counter options held by the Fund and
that portion of assets used to cover such options. This policy is not a
fundamental policy and does not limit purchases of restricted securities
that are eligible for sale to qualified institutional purchasers pursuant
to Rule 144A under the Securities Act of 1933, provided that those
securities have been determined to be liquid by the Board of Trustees or
by the Manager under Board-approved guidelines. Those guidelines take
into account trading activity for such securities and the availability of
reliable pricing information, among other factors. If there is a lack of
trading interest in particular Rule 144A security, the Fund's holding of
that security may be deemed to be illiquid. There may be undesirable
delays in selling illiquid securities at prices representing their fair
value. The expenses of registration of restricted securities that are
subject to legal restrictions on resale (excluding securities that may be
resold by the Fund pursuant to Rule 144A), may be negotiated at the time
such securities are purchased by the Fund. When registration is required,
a considerable period may elapse between a decision to sell the securities
and the time the Fund would be permitted to sell them. Thus, the Fund
might not be able to obtain as favorable a price as that prevailing at the
time of the decision to sell. The Fund also may acquire, through private
placements, securities having contractual resale restrictions, which might
lower the amount realizable upon the sale of such securities.
- Loans of Portfolio Securities. The Fund may lend its portfolio
securities (other than in repurchase transactions) to brokers, dealers and
other financial institutions subject to the restrictions stated in the
Prospectus. Under applicable regulatory requirements (which are subject
to change), the loan collateral, on each business day must, at least equal
the market value of the loaned securities and must consist of cash, bank
letters of credit, U.S. Government Securities, or other cash equivalents
in which the Fund is permitted to invest. To be acceptable as collateral,
letters of credit must obligate a bank to pay amounts demanded by the Fund
if the demand meets the terms of the letter. Such terms and the issuing
bank must be satisfactory to the Fund. In a portfolio securities lending
transaction, the Fund receives from the borrower an amount equal to the
interest paid or the dividends declared on the loaned securities during
the term of the loan as well as the interest on the collateral securities,
less any finders' or administrative fees the Fund pays in arranging the
loan. The Fund may share the interest it receives on the collateral
securities with the borrower as long as it realizes at least a minimum
amount of interest required by the lending guidelines established by its
Board of Trustees. In connection with securities lending, the Fund might
experience risks of delay in receiving additional collateral, or risks of
delay in recovery of the securities, or loss of rights in the collateral
should the borrower fail financially. The Fund will not lend its
portfolio securities to any officer, trustee, employee or affiliate of the
Trust, its Manager or Sub-Adviser. The terms of the Fund's loans must
meet certain tests under the Internal Revenue Code and permit the Fund to
reacquire loaned securities on five business days' notice or in time to
vote on any important matter.
- "When-Issued" and Delayed Delivery Transactions. The Fund may
purchase securities on a "when-issued" basis, and may purchase or sell
such securities on a "delayed delivery" basis. Although the Fund will
enter into such transactions for the purpose of acquiring securities for
its portfolio or for delivery pursuant to options contracts it has entered
into, the Fund may dispose of a commitment prior to settlement. "When-
issued" or "delayed delivery" refers to securities whose terms and
indenture are available and for which a market exists, but which are not
available for immediate delivery. When such transactions are negotiated,
the price (which is generally expressed in yield terms) is fixed at the
time the commitment is made, but delivery and payment for the securities
take place at a later date. The Fund does not intend to make such
purchases for speculative purposes. Such securities may bear interest at
a lower rate than longer-term securities. The commitment to purchase a
security for which payment will be made on a future date may be deemed a
separate security and involve a risk of loss if the value of the security
declines prior to the settlement date. During the period between
commitment by the Fund and settlement (generally within two months but not
to exceed 120 days), no payment is made for the securities purchased by
the purchaser, and no interest accrues to the purchaser from the
transaction. Such securities are subject to market fluctuation; the value
at delivery may be less than the purchase price. The Fund will maintain
a segregated account with its Custodian, consisting of cash, U.S.
Government securities or other high grade debt obligations at least equal
to the value of purchase commitments until payment is made.
The Fund will engage in when-issued transactions in order to secure
what is considered to be an advantageous price and yield at the time of
entering into the obligation. When the Fund engages in when-issued or
delayed delivery transactions, it relies on the buyer or seller, as the
case may be, to consummate the transaction. Failure of the buyer or
seller to do so may result in the Fund losing the opportunity to obtain
a price and yield considered to be advantageous. At the time the Fund
makes a commitment to purchase or sell a security on a when-issued or
forward commitment basis, it records the transaction and reflects the
value of the security purchased, or if a sale, the proceeds to be
received, in determining its net asset value. If the Fund chooses to (i)
dispose of the right to acquire a when-issued security prior to its
acquisition or (ii) dispose of its right to deliver or receive against a
forward commitment, it may incur a gain or loss.
To the extent the Fund engages in when-issued and delayed delivery
transactions, it will do so for the purpose of acquiring or selling
securities consistent with its investment objective and policies and not
for the purposes of investment leverage. The Fund enters into such
transactions only with the intention of actually receiving or delivering
the securities, although (as noted above), when-issued securities and
forward commitments may be sold prior to settlement date. In addition,
changes in interest rates before settlement in a direction other than that
expected by the Manager will affect the value of such securities and may
cause a loss to the Fund.
When-issued transactions and forward commitments allow the Fund a
technique to use against anticipated changes in interest rates and prices.
For instance, in periods of rising interest rates and falling prices, the
Fund might sell securities in its portfolio on a forward commitment basis
to attempt to limit its exposure to anticipated falling prices. In
periods of falling interest rates and rising prices, the Fund might sell
portfolio securities and purchase the same or similar securities on a
when-issued or forward commitment basis, thereby obtaining the benefit of
currently higher cash yields.
- Short Sales Against-the-Box. In such short sales, while the short
position is open, the Fund must own an equal amount of the securities sold
short, or by virtue of ownership of other securities have the right,
without payment of further consideration, to obtain an equal amount of the
securities sold short. Short sales against-the-box may be made to defer,
for Federal income tax purposes, recognition of gain or loss on the sale
of securities "in the box" until the short position is closed out.
Other Investment Restrictions
The Fund's significant investment restrictions are set forth in the
Prospectus. There are additional investment restrictions that the Fund
must follow that are also fundamental policies. Fundamental policies and
the Fund's investment objective cannot be changed without the vote of a
"majority" of the Fund's outstanding voting securities. Under the
Investment Company Act, such a "majority" vote is defined as the vote of
the holders of the lesser of (i) 67% or more of the shares present or
represented by proxy at a shareholder meeting, if the holders of more than
50% of the outstanding shares are present, or (ii) more than 50% of the
outstanding shares.
Under these additional restrictions, the Trust may not, on behalf of
the Fund: (1) act as an underwriter, except to the extent that, in
connection with the disposition of portfolio securities, the Fund may be
deemed an underwriter under applicable laws; (2) invest in oil, gas or
other mineral leases, rights, royalty contracts or exploration or
development programs, real estate or real estate mortgage loans (this
restriction does not prevent the Fund from purchasing securities secured
or issued by companies investing or dealing in real estate and by
companies that are not principally engaged in the business of buying and
selling such leases, rights, contracts or programs); (3) purchase
commodities or commodity contracts except futures contracts, including but
not limited to contracts for the future delivery of securities and futures
contracts based on securities indexes; (4) make loans other than by
investing in obligations in which the Fund may invest consistent with its
investment objective and policies and other than repurchase agreements and
loans of portfolio securities; (5) pledge, mortgage or hypothecate its
assets, except that, to secure permitted borrowings, it may pledge
securities having a market value at the time of the pledge not exceeding
15% of the cost of the Fund's total assets and except in connection with
permitted transactions in options, futures contracts and options on
futures contracts, and except for reverse repurchase agreements and
securities lending; (6) purchase or retain securities of any issuer if,
to the knowledge of the Trust, more than 5% of such issuer's securities
are beneficially owned by officers and trustees of the Trust or officers
and directors of Massachusetts Mutual Life Insurance Company
("MassMutual") who individually beneficially own more than 1/2 of 1% of
the securities of such issuer; and (7) make loans to an officer, trustee
or employee of the Trust or to any officer, director or employee of
MassMutual, or to MassMutual.
In addition to the investment restrictions described above and those
contained in the Prospectus, the Trustees of the Trust have voluntarily
adopted certain policies and restrictions which are observed in the
conduct of the affairs of the Fund. These represent intentions of the
Trustees based upon current circumstances. They differ from fundamental
investment policies in that the following additional investment
restrictions may be changed or amended by action of the Trustees without
requiring prior notice to or approval of shareholders. In accordance with
such nonfundamental policies and guidelines, the Fund may not: (1) invest
for the purpose of exercising control over, or management of, any company;
(2) purchase any security of a company which (including any predecessor,
controlling person, general partner and guarantor) has a record of less
than three years of continuous operations or relevant business experience,
if such purchase would cause more than 5% of the current value of the
Fund's assets to be invested in such companies; and (3) invest in
securities of other investment companies, except by purchase in the open
market where no commission or profit to a sponsor or dealer results from
such purchase other than the customary broker's commission, except when
such purchase is part of a plan of merger, consolidation, reorganization
or acquisition.
How the Fund is Managed
Organization and History. The Fund is one of two series of
Oppenheimer Integrity Funds (the "Trust"). This Statement of Additional
Information may be used with the Fund's Prospectus only to offer shares
of the Fund. The Trust was established in 1982 as MassMutual Liquid
Assets Trust and changed its name to MassMutual Integrity Funds on April
15, 1988. The Fund was established as a separate Massachusetts business
trust known as MassMutual Equity Investors Trust in 1986, and was
reorganized as a series of the Trust on April 15, 1988. On March 29,
1991, the Trust changed its name from MassMutual Integrity Funds to
Oppenheimer Integrity Funds and the Fund changed its name from MassMutual
Value Stock Fund to Oppenheimer Value Stock Fund.
As a Massachusetts business Trust, the Trust is not required to hold,
and does not plan to hold, regular annual meetings of shareholders. The
Trust will hold meetings when required to do so by the Investment Company
Act or other applicable law, or when a shareholder meeting is called by
the Trustees or upon proper request of the shareholders. Shareholders
have the right, upon the declaration in writing or vote of two-thirds of
the outstanding shares of the Trust, to remove a Trustee. The Trustees
will call a meeting of shareholders to vote on the removal of a Trustee
upon the written request of the record holders of at least 10% of its
outstanding shares. In addition, if the Trustees receive a request from
at least 10 shareholders (who have been shareholders for at least six
months) holding shares of the Trust valued at $25,000 or more or holding
at least 1% of the Trust's outstanding shares, whichever is less, stating
that they wish to communicate with other shareholders to request a meeting
to remove a Trustee, the Trustees will then either make the Trust's
shareholder list available to the applicants or mail their communication
to all other shareholders at the applicant's expense, or the Trustees may
take such other action as set forth under Section 16(c) of the Investment
Company Act.
The Trust's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Trust's obligations, and provides
for indemnification and reimbursement of expenses out of its property for
any shareholder held personally liable for its obligations. The
Declaration of Trust also provides that the Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act
or obligation of the Fund and satisfy any judgment thereon. Thus, while
Massachusetts law permits a shareholder of a business trust (such as the
Trust) to be held personally liable as a "partner" under certain
circumstances, the risk of a Trust shareholder incurring financial loss
on account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any
shareholder of the Trust, agrees under the Trust's Declaration of Trust
to look solely to the assets of the Trust for satisfaction of any claim
or demand which may arise out of any dealings with the Trust, and the
Trustees shall have no personal liability to any such person, to the
extent permitted by law.
Trustees And Officers
The Trust's Trustees and officers and their principal occupations and
business affiliations during the past five years are listed below. All
of the Trustees are also trustees, directors or managing general partners
of Oppenheimer Total Return Fund, Inc., Oppenheimer Equity Income Fund,
Oppenheimer High Yield Fund, Oppenheimer Cash Reserves, Oppenheimer Tax-
Exempt Cash Reserves, Oppenheimer Tax-Exempt Bond Fund, Oppenheimer
Limited-Term Government Fund, The New York Tax-Exempt Income Fund, Inc.,
Oppenheimer Champion High Yield Fund, Oppenheimer Main Street Funds, Inc.,
Oppenheimer Strategic Funds Trust, Oppenheimer Strategic Income & Growth
Fund, Oppenheimer Strategic Investment Grade Bond Fund, Oppenheimer
Strategic Short-Term Income Fund and Oppenheimer Variable Account Funds;
as well as the following "Centennial Funds": Daily Cash Accumulation
Fund, Inc., Centennial America Fund, L.P., Centennial Money Market Trust,
Centennial Government Trust, Centennial New York Tax Exempt Trust,
Centennial Tax Exempt Trust and Centennial California Tax Exempt Trust,
(all of the foregoing funds are collectively referred to as the "Denver
OppenheimerFunds"). Mr. Fossel is President and Mr. Swain is Chairman of
the Denver OppenheimerFunds. As of March 29, 1994, the Trustees and
officers of the Fund as a group owned less than 1% of the Fund's
outstanding shares.
Robert G. Avis, Trustee
One North Jefferson Ave., St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G.
Edwards, Inc. (its parent holding company); Chairman of A.G.E. Asset
Management and A.G. Edwards Trust Company (its affiliated investment
adviser and trust company, respectively).
William A. Baker, Trustee
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Trustee
5301 Bolsa Avenue, Huntington Beach, California 92647
Vice President of McDonnell Douglas Ltd.; formerly associated with the
National Aeronautics and Space Administration.
Jon S. Fossel, President and Trustee*
Two World Trade Center, New York, New York 10048-0203
Chairman, Chief Executive Officer and a director of the Manager; President
and a director of Oppenheimer Acquisition Corp. ("OAC"), the Manager's
parent holding company; President and a director of HarbourView Asset
Management Corporation ("HarbourView"), a subsidiary of the Manager; a
director of Shareholder Services, Inc. ("SSI") and Shareholder Financial
Services, Inc. ("SFSI"), transfer agent subsidiaries of the Manager;
formerly President of the Manager.
Raymond J. Kalinowski, Trustee
44 Portland Drive, St. Louis, Missouri 63131
Formerly Vice Chairman and a director of A.G. Edwards, Inc., parent
holding company of A.G. Edwards & Sons, Inc. (a broker-dealer), of which
he was a Senior Vice President.
C. Howard Kast, Trustee
2552 East Alameda, Denver, Colorado 80209
Formerly the Managing Partner of Deloitte, Haskins & Sells (an accounting
firm).
Robert M. Kirchner, Trustee
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Ned M. Steel, Trustee
3416 S. Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; formerly Senior Vice
President and a director ofVan Gilder Insurance Corp. (insurance brokers).
James C. Swain, Chairman and Trustee*
3410 South Galena Street, Denver, Colorado 80231
Vice Chairman of the Manager; President and Director of Centennial Asset
Management Corporation, an investment adviser subsidiary of the Manager
("Centennial"); formerly President and Director of Oppenheimer Asset
Management Corporation ("OAMC"), an investment adviser which was a
subsidiary of the Manager, and Chairman of the Board of SSI.
Andrew J. Donohue, Vice President
Executive Vice President and General Counsel of Oppenheimer Management
Corporation ("OMC") (the "Manager") and Oppenheimer Funds Distributor,
Inc. (the "Distributor"); an officer of other OppenheimerFunds; formerly
Senior Vice President and Associate General Counsel of the Manager and the
Distributor; Partner in, Kraft & McManimon (a law firm); an officer of
First Investors Corporation (a broker-dealer) and First Investors
Management Company, Inc. (broker-dealer and investment adviser); director
and an officer of First Investors Family of Funds and First Investors Life
Insurance Company.
George C. Bowen, Vice President, Secretary and Treasurer
3410 South Galena Street Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President and
Treasurer of the Distributor and HarbourView; Senior Vice President,
Treasurer, Assistant Secretary and a director of Centennial; Vice
President, Treasurer and Secretary of SSI and SFSI; an officer of other
OppenheimerFunds; formerly Senior Vice President/Comptroller and Secretary
of OAMC.
David B. Salerno, Vice President and Portfolio Manager
100 Northfield Drive, Windsor, Connecticut 06095
Managing Director of the Sub-Advisor; Senior Vice President of MML Series
Investment Fund.
Robert G. Zack, Assistant Secretary
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate General Counsel of the Manager,
Assistant Secretary of SSI and SFSI; an officer of other OppenheimerFunds.
Robert Bishop, Assistant Treasurer
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an officer
of other OppenheimerFunds; previously a Fund Controller of the Manager,
prior to which he was an Accountant for Resolution Trust Corporation and
previously an Accountant and Commissions Supervisor for Stuart James
Company Inc., a broker-dealer.
__________________
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Remuneration of Trustees. The officers of the Trust are affiliated
with the Manager; they and the Trustees of the Fund who are affiliated
with the Manager (Mr. Swain and Mr. Fossel, who is both an officer and
Trustee) and receive no salary or fee from the Fund. During the Fund's
fiscal year ended December 31, 1993, the remuneration (including expense
reimbursements) paid to all Trustees of the Fund (excluding Mr. Fossel and
Mr. Swain) as a group for services as Trustees and as members of one or
more committees totaled $7,731.
Major Shareholders. As of March 29, 1994, the only entity that owned
of record or was known by the Fund to own beneficially 5% or more of any
class of the Fund's outstanding shares was Massachusetts Mutual Life
Insurance Company, 1295 State Street, Springfield, Massachusetts 01111,
which owned 2,957,743.930 Class A shares (44.27%) of the Fund, and which
represented 17.63% of the Trust.
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled by
Massachusetts Mutual Life Insurance Company. OAC is also owned in part
by certain of the Manager's directors and officers, some of whom also
serve as officers of the Fund, and two of whom (Mr. Jon S. Fossel and Mr.
James C. Swain) serve as Trustees of the Fund.
- The Investment Advisory Agreement. The investment advisory
agreement, dated as of March 28, 1991, between the Trust on behalf of the
Fund and the Manager requires the Manager, at its expense, to provide the
Fund with adequate office space, facilities and equipment and to provide
and supervise the activities of all administrative and clerical personnel
required to provide effective corporate administration for the Fund,
including the compilation and maintenance of records with respect to its
operations, the preparation and filing of specified reports, and
composition of proxy materials and registration statements for continuous
public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the advisory
agreement or by the Distributor under the Distribution Agreement are paid
by the Fund. The advisory agreement lists examples of expenses paid by
the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, fees to certain Trustees, legal and audit expenses,
custodian and transfer agent expenses, share issuance costs, certain
printing and registration costs and non-recurring expenses, including
litigation costs.
The advisory agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence in the performance of its
duties or reckless disregard for its obligations and duties under the
advisory agreement, the Manager is not liable for any loss resulting from
a good faith error or omission on its part with respect to any of its
duties thereunder. The advisory agreement permits the Manager to act as
investment adviser for any other person, firm or corporation and to use
the name "Oppenheimer" in connection with other investment companies for
which it may act as investment advisor or general distributor. If the
Manager shall no longer act as investment adviser to the Fund, the right
of the Fund to use the name "Oppenheimer" as part of its name may be
withdrawn.
Prior to April 23, 1993, MassMutual served as the Fund's
investment sub-adviser under a prior sub-advisory agreement (the "Prior
Sub-Advisory Agreement"). The Manager paid MassMutual a sub-advisory fee
under the Prior Sub-Advisory Agreement at the following annual rates:
0.40% of the Fund's first $100 million of average annual net assets, 0.30%
of the next $200 million, 0.25% of the next $200 million and 0.20% of
average annual net assets in excess of $500 million. From January 1, 1993
through April 23, 1993, MassMutual temporarily delegated to the Sub-
Adviser its duties to manage the investment and reinvestment of the Fund's
assets under the Prior Sub-Advisory Agreement (but not its other duties).
MassMutual also transferred the senior investment personnel responsible
for advising the Fund to the Sub-Adviser. The delegation of duties to the
Sub-Adviser was subject to MassMutual's supervision and control and
subject to MassMutual's right to terminate the delegation at any time.
On April 23, 1993, the Fund's shareholders approved a new sub-
advisory agreement (the "sub-advisory agreement") with the Sub-Adviser,
thereby terminating the delegation of duties under the Prior Sub-Advisory
Agreement. The sub-advisory fees paid under the sub-advisory agreement
are stated in the Prospectus. In connection with approval of the sub-
advisory agreement by the Trust's Board of Trustees and shareholders,
MassMutual has represented that there will be no substantive change in the
sub-advisory relationship other than the restructuring of investment
advisory duties between MassMutual and the Sub-Adviser pursuant to
MassMutual's internal reorganization of its investment advisory services
for equity assets. MassMutual has agreed to guarantee the performance of
the Sub-Adviser under the sub-advisory agreement. That guarantee may be
amended or terminated by a written instrument signed by MassMutual, the
Manager and the Fund, and shall terminate if for three consecutive 12
month fiscal year ends the Sub-Adviser has total stockholders equity of
at least $200,000 according to its annual audited financial statements
delivered to the Fund. Attaining such level of stockholders equity shall
not preclude the Trust's Board of Trustees from considering the financial
condition of the Sub-Adviser or any other matters in determining at any
time whether to terminate, approve or renew the sub-advisory agreement.
Under the sub-advisory agreement, the Sub-Advisor is responsible
for managing the Fund's portfolio of securities and making investment
decisions with respect to the Fund's investments subject to the Fund's
investment policies established by the Board of Trustees of the Trust, and
in accordance with the Fund's investment objective, policies and
restrictions, set forth in the Prospectus and this Additional Statement.
The sub-advisory agreement has the same provisions as to renewal,
termination and the standard of care as the investment advisory agreement,
and both advisory agreements are subject to annual approval by the
Trustees, who may terminate either advisory agreement on sixty days'
notice approved by a majority of the Trustees.
The advisory agreements contain no expense limitation. However,
independently of the advisory and sub-advisory agreements, the Manager has
undertaken that the total expenses of the Fund in any fiscal year
(including the management fee, but excluding taxes, interest, brokerage
fees, distribution plan payments, and extraordinary expenses, such as
litigation costs) shall not exceed (and the Manager undertakes to reduce
the Fund's management fee in the amount by which such expenses shall
exceed) the most stringent applicable state "blue sky" expense limitation
requirement for qualification of sale of the Fund's shares. At present,
that limitation is imposed by California and limits expenses (with
specified exclusions) to 2.5% of the first $30 million of the Fund's
average annual net assets, 2.0% of the next $70 million of average net
assets and 1.5% of average net assets in excess of $100 million. The
Manager reserves the right to change or eliminate this expense limitation
at any time.
The payment of the management fee at the end of any month will be
reduced so that at no time will there be any accrued but unpaid liability
under the above expense limitation.
Prior to March 28, 1991, MassMutual was the Fund's investment
adviser, and MML Investors Services, Inc. ("MMLISI"), a wholly-owned
subsidiary of MassMutual (and therefore an affiliate of an affiliate of
the Fund), was the Distributor of shares of the Fund. For the fiscal year
ended December 31, 1991, the advisory fees paid to MassMutual for the
period from January 1, 1991 to March 27, 1991 pursuant to the prior
investment advisory agreement, were $75,574, and the advisory fees paid
to the Manager were $266,278 (net of a $21,414 expense assumption by
MassMutual), of which $142,541 was paid by the Manager to MassMutual
pursuant to the ub-advisory agreement. For the fiscal year ended December
31, 1992, the advisory fees paid by the Fund to the Manager was $401,148,
of which $215,035 was paid by the Manager to MassMutual pursuant to the
Fund's prior sub-advisory agreement. For the fiscal year ended December
31, 1993, the advisory fees paid by the Fund to the Manager were $614,932,
of which $264,792 was paid by the Manager to the Sub-Advisor.
- The Distributor. Under the General Distributor's Agreement
between the Trust and the Distributor, the Distributor acts as the Fund's
principal underwriter in the continuous public offering of the Fund's
Class A and Class B shares, but is not obligated to sell a specific number
of shares. Expenses normally attributable to sales (other than those paid
under the Class B Distribution and Service Plan), including advertising
and the cost of printing and mailing prospectuses (other than those
furnished to existing shareholders), are borne by the Distributor. During
the Fund's fiscal years ended December 31, 1991, 1992 and 1993, the
aggregate amount of sales charges on sales of the Fund's Class A shares
was $83,992, $171,597 and $296,555, respectively, of which the Distributor
and MMLISI retained in the aggregate $81,195, $162,902 and $232,226 in
those respective years. From May 1, 1993 (commencement of offering of
Class B shares) to December 31, 1993, the Distributor advanced $204,505
to broker-dealers on the sales of the Funds' Class B shares, $72,372 of
which went to MMLISI. In addition, the Distributor collected $58 from
contingent deferred sales charges assessed on Class B shares.
- The Transfer Agent. Oppenheimer Shareholder Services, the
Fund's tranfer agent, is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for
shareholder servicing and administrative functions.
Brokerage Policies Of The Fund
Brokerage Provisions of the Investment Advisory and Sub-Advisory
Agreements. One of the duties of the Sub-Adviser under the sub-advisory
agreement is to arrange the portfolio transactions of the Fund. In doing
so, the Sub-Adviser is authorized by the sub-advisory agreement to employ
broker-dealers ("brokers"), including "affiliated" brokers, as that term
is defined in the Investment Company Act, as may, in its best judgment
based on all relevant factors, implement the policy of the Fund to
obtain, at reasonable expense, the "best execution" (prompt and reliable
execution at the most favorable price obtainable) of such transactions.
Under the sub-advisory agreement, the Sub-Adviser is authorized
to select brokers which provide brokerage and/or research services for the
Fund and/or the other accounts over which it or its affiliates have
investment discretion. The commissions paid to such brokers may be higher
than another qualified broker would have charged, if a good faith
determination is made by the Sub-Adviser that the commission is reasonable
in relation to the services provided.
Description of Brokerage Practices Followed by the Manager. Subject
to the provisions of the advisory agreement, the procedures and rules
described above, allocations of brokerage are made by portfolio managers
under the supervision of the Manager's executive officers and the Sub-
Adviser. Transactions in securities other than those for which an
exchange is the primary market are generally done with principals or
market makers. Brokerage commissions are paid primarily for effecting
transactions in listed securities and otherwise only if it appears likely
that a better price or execution can be obtained. When the Fund engages
in an option transaction, ordinarily the same broker will be used for the
purchase or sale of the option and any transactions in the securities to
which the option relates. Option commissions may be relatively higher
than those which would apply to direct purchases and sales of portfolio
securities.
The research services provided by a particular broker may be
useful only to one or more of the advisory accounts of the Sub-Adviser and
its affiliates, and investment research received for the commissions of
those other accounts may be useful both to the Fund and one or more of
such other accounts. Such research, which may be supplied by a third
party at the instance of a broker, includes information and analyses on
particular companies and industries as well as market or economic trends
and portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Sub-Adviser in a
non-research capacity (such as bookkeeping or other administrative
functions), then only the percentage or component that provides assistance
to the Sub-Adviser in the investment decision-making process may be paid
for in commission dollars.
The research services provided by brokers broaden the scope and
supplement the research activities of the Sub-Adviser by making available
additional views for consideration and comparisons, and enabling the Sub-
Adviser to obtain market information for the valuation of securities held
in the Fund's portfolio or being considered for purchase. The Board,
including the independent Trustees of the Trust (those Trustees of the
Trust who are not "interested persons," as defined in the Investment
Company Act, and who have no direct or indirect financial interest in the
operation of the advisory agreements, or Distribution Plans described
below) or in any agreements relating to those Plans, annually reviews
information furnished by the Sub-Adviser as to the commissions paid to
brokers furnishing such services so that the Board may ascertain whether
the amount of such commissions was reasonably related to the value or
benefit of such services.
Pursuant to the sub-advisory agreement, the Sub-Adviser is
authorized, in arranging the purchase and sale of the Fund's portfolio
securities, to employ or deal with such members of the securities
exchanges, brokers or dealers as may in the its best judgement implement
the policy of the Fund to obtain, at reasonable expense, the "best
execution" (i.e., prompt and reliable execution at the most favorable
security price obtainable) of the Fund's portfolio transactions. The Sub-
Adviser shall select broker-dealers to effect the Fund's portfolio
transactions on the basis of its estimate of their ability to obtain best
execution of particular and related portfolio transactions. The abilities
of a broker-dealer to obtain best execution of particular portfolio
transaction(s) will be judged by the Sub-Adviser on the basis of all
relevant factors and considerations.
Securities held by the Fund may also be held by Sub-Adviser in its
investment accounts and by other investment companies for which it acts
as investment adviser. If the same security is purchased or sold for the
Fund and such investment accounts or companies at or about the same time,
such purchases or sales normally will be combined, to the extent
practicable, and will be allocated as nearly as practicable on a pro rata
basis in proportion to the amounts to be purchased and sold. The main
factors to be considered will be the investment objectives of the
respective portfolios, the relative size of portfolio holdings of the same
or comparable security, availability of cash for investment by the various
portfolios and the size of their respective investment commitments. It
is believed that the ability of the Fund to participate in larger volume
transactions will, in most cases, produce better execution for the Fund.
In some cases, however, this procedure could have a detrimental effect on
the price and amount of a security available to the Fund or the price at
which a security may be sold. It is the opinion of the Trust's management
that such execution advantage and the desirability of retaining the Sub-
Adviser in that capacity outweigh the disadvantages, if any, which might
result from this procedure.
Paul Hallingby, Jr. is a director of MassMutual and a General
Partner of Bear Stearns & Co., Inc. ("Bear Stearns"). For its fiscal
years ended December 31, 1991, 1992 and 1993, the Fund paid brokerage fees
to Bear Stearns of $822, $1,110 and $4,239, respectively. For the fiscal
year ended December 31, 1993, the Fund placed 6.7% of its transactions
involving payment of commissions with Bear Stearns, for which it was paid
8.2% of the Fund's aggregate brokerage fees for that period.
During the fiscal years ended December 31, 1991, 1992 and 1993,
total brokerage commissions paid by the Fund (not including spreads or
concessions on principal transactions on a net trade basis) were $14,863,
$20,543 and $51,707, respectively. During the fiscal year ended December
31, 1993, $26,271 was paid to dealers as brokerage commissions in return
for research services (including special research, statistical information
and execution); the aggregate dollar amount of those transactions was
$35,562,706. The transactions giving rise to those commissions were
allocated in accordance with the internal allocation procedures described
above.
Performance of the Fund
Total Return Information. As described in the Prospectus, from time
to time the "average annual total return", "total return," and "total
return at net asset value" of an investment in a class of the Fund may be
advertised. An explanation of how total returns are calculated for each
class and the components of those calculations is set forth below.
The Fund's advertisement of its performance must, under applicable
rules of the Securities and Exchange Commission, include the average
annual total returns for each class of shares of the Fund for the 1, 5 and
10-year periods (or the life of the class, if less) as of the most
recently ended calendar quarter prior to the publication of the
advertisement. This enables an investor to compare the Fund's performance
to the performance of other funds for the same periods. However, a number
of factors should be considered before using such information as a basis
for comparison with other investments. An investment in the Fund is not
insured; its total returns and share prices are not guaranteed and
normally will fluctuate on a daily basis. When redeemed, an investor's
shares may be worth more or less than their original cost. Total returns
for any given past period are not a prediction or representation by the
Fund of future rates of return on its shares. The total returns of Class
A and Class B shares of the Fund are affected by portfolio quality, the
type of investments the Fund holds and its operating expenses allocated
to a particular class.
- Average Annual Total Returns. The "average annual total
return" of each class is an average annual compounded rate of return for
each year in a specified number of years. It is the rate of return based
on the change in value of a hypothetical initial investment of $1,000 ("P"
in the formula below) held for a number of years ("n") to achieve an
Ending Redeemable Value ("ERV"), according to the following formula:
( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )
- Cumulative Total Returns. The cumulative "total return"
calculation measures the change in value of a hypothetical investment of
$1,000 over an entire period of years. Its calculation uses some of the
same factors as average annual total return, but it does not average the
rate of return on an annual basis. Cumulative total return is determined
as follows:
ERV - P
- ------- = Cumulative Total Return
P
In calculating total returns for Class A shares, the current
maximum sales charge of 5.75% (as a percentage of the offering price) is
deducted from the initial investment ("P") (unless the return is shown at
net asset value, as discussed below). For Class B shares, the payment of
the applicable contingent deferred sales charge (5.0% for the first year,
4.0% for the second year, 3.0% for the third and fourth years, 2.0% in the
fifth year, 1.0% in the sixth year and none thereafter) is applied to the
investment result for the time period shown (unless the total return is
shown at net asset value, as described below). Total returns also assume
that all dividends and capital gains distributions during the period are
reinvested to buy additional shares at net asset value per share, and that
the investment is redeemed at the end of the period. The "average annual
total returns" on an investment in Class A shares of the Fund for the one
and five-year periods ended December 31, 1993 and for the period from
December 22, 1986 (the date the Fund became an open-end Fund) to December
31, 1993, were 2.70%, 11.10% and 9.92%, respectively. The cumulative
"total return" on Class A shares for the latter period was 94.30%. For
the fiscal period from May 1, 1993, through December 31, 1993, the average
annual total return and the cumulative total return on an investment in
Class B shares of the Fund were (0.55%) and (0.37%), respectively.
- Total Returns at Net Asset Value. From time to time the Fund
may also quote an "average annual total return at net asset value" or a
cumulative "total return at net asset value" for Class A or Class B
shares. Each is based on the difference in net asset value per share at
the beginning and the end of the period for a hypothetical investment in
that class of shares (without considering front-end or contingent sales
charges) and takes into consideration the reinvestment of dividends and
capital gains distributions. The cumulative "total returns at net asset
value" on the Fund's Class A shares for the fiscal year ended December 31,
1993, and for the period from December 22, 1986 to December 31, 1993 were
8.97% and 106.16%, respectively. The cumulative total return at net asset
value on the Fund's Class B shares for the fiscal period from May 1, 1993
through December 31, 1993 was 4.63%.
Other Performance Comparisons. From time to time the Fund may publish
the ranking of its Class A or Class B shares by Lipper Analytical
Services, Inc. ("Lipper"), a widely-recognized independent mutual fund
monitoring service. Lipper monitors the performance of regulated
investment companies, including the Fund, and ranks their performance for
various periods based on categories relating to investment objectives.
The performance of the Fund's classes is ranked against (i) all other
funds, excluding money market funds, and (ii) all other equity funds. The
Lipper performance rankings are based on total return that includes the
reinvestment of capital gains distributions and income dividends but does
not take sales charges or taxes into consideration.
From time to time the Fund may publish the ranking of the
performance of its Class A or Class B shares by Morningstar, Inc., an
independent mutual fund monitoring service that ranks various mutual
funds, including the Fund, based upon the fund's three, five and ten-year
average annual total returns (when available) and a risk factor that
reflects fund performance relative to three-month U.S. Treasury bill
monthly returns. Such returns are adjusted for fees and sales loads.
There are five ranking categories with a corresponding number of stars:
highest (5), above average (4), neutral (3), below average (2) and lowest
(1). Morningstar ranks the Fund in relation to other equity funds.
The total return on an investment made in Class A or Class B
shares of the Fund may be compared with performance for the same period
of the Standard & Poor's 500 Index or the New York Stock Exchange Index,
which are widely-recognized indices of stock performance. Such indices
consist of unmanaged groups of common stocks. Neither of those indices
includes the reinvestment of income dividends or takes the sales charges
or taxes into consideration, as these items are not applicable to indices.
From time to time the Fund may also include in its advertisements
and sales literature performance information about the Fund or rankings
of the Fund's performance cited in newspapers or periodicals, such as The
New York Times. These articles may include quotations of performance from
other sources, such as Lipper or Morningstar.
When comparing total return and investment risk of an investment
in Class A or Class B shares of the Fund with other investments, investors
should understand that certain other investments have different risk
characteristics than an investment in shares of the Fund. For example,
certificates of deposit may have fixed rates of return and may be insured
as to principal and interest by the FDIC, while the Fund's returns will
fluctuate and its share values and returns are not guaranteed. Money
market accounts offered by banks also may be insured by the FDIC and may
offer stability of principal. U.S. Treasury securities are guaranteed as
to principal and interest by the full faith and credit of the U.S.
government. Money market mutual funds may seek to offer a fixed price per
share.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A Shares and a
Distribution and Service Plan for Class B shares of the Fund under Rule
12b-1 of the Investment Company Act, pursuant to which the Fund will
reimburse the Distributor for all or a portion of its costs incurred in
connection with the distribution and/or servicing of the shares of that
class, as described in the Prospectus. Each Plan has been approved by a
vote of (i) the Board of Trustees of the Fund, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose
of voting on that Plan, and (ii) the holders of a "majority" (as defined
in the Investment Company Act) of the shares of each class (for the
Distribution and Service Plan for the Class B shares, that vote was cast
by the Manager as the then-sole initial holder of Class B shares of the
Fund).
In addition, under the Plans, the Manager and the Distributor may,
in their sole discretion, from time to time may use their own resources
(which, in the case of the Manager, may include profits from the advisory
fee it receives from the Fund) to make payments to brokers, dealers or
other financial institutions (each is referred to as a "Recipient" under
the Plans) for distribution and administrative services they perform. The
Distributor and the Manager may, in their sole discretion, increase or
decrease the amount of payments they make to Recipients from their own
resources.
Unless terminated as described below, each Plan continues in
effect from year to year but only as long as such continuance is
specifically approved at least annually by the Fund's Board of Trustees
and its Independent Trustees by a vote cast in person at a meeting called
for the purpose of voting on such continuance. Either Plan may be
terminated at any time by the vote of a majority of the Independent
Trustees or by the vote of the holders of a "majority" (as defined in the
Investment Company Act) of the outstanding shares of that class. Neither
Plan may be amended to increase materially the amount of payments to be
made unless such amendment is approved by shareholders of the class
affected by the amendment. All material amendments must be approved by
the Independent Trustees.
While the Plans are in effect, the Treasurer of the Trust shall
provide separate written reports to the Trust's Board of Trustees at least
quarterly on the amount of all payments made pursuant to each Plan, the
purpose for which the payment was made and the identity of each Recipient
that received any such payment. The report for the Class B Plan shall
also include the distribution costs for that quarter, and such costs for
previous fiscal periods that are carried forward, as explained in the
Prospectus and below. Those reports, including the allocations on which
they are based, will be subject to the review and approval of the
Independent Trustees in the exercise of their fiduciary duty. Each Plan
further provides that while it is in effect, the selection and nomination
of those Trustees of the Trust who are not "interested persons" of the
Trust is committed to the discretion of the Independent Trustees. This
does not prevent the involvement of others in such selection and
nomination if the final decision on any such selection or nomination is
approved by a majority of the Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by the
Recipient for itself and its customers did not exceed a minimum amount,
if any, that may be determined from time to time by a majority of the
Fund's Independent Trustees. Initially, the Board of Trustees has set the
fee at the maximum rate and set no minimum amount.
For the fiscal year ended December 31, 1993, payments under the
Class A Plan totaled $198,834, all of which was paid by the Distributor
to Recipients, including $149,525 paid to MMLISI.
Any unreimbursed expenses incurred with respect to Class A shares
for any fiscal quarter by the Distributor may not be recovered under the
Class A Plan in subsequent fiscal quarters. Payments received by the
Distributor under the Plan for Class A shares will not be used to pay any
interest expense, carrying charges, or other financial costs, or
allocation of overhead by the Distributor.
The Class B Plan allows the service fee payment to be paid by the
Distributor to Recipients in advance for the first year Class B shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. Service fee payments by the Distributor to Recipients will
be made (i) in advance for the first year Class B shares are outstanding,
following the purchase of shares, in an amount equal to 0.25% of the net
asset value of the shares purchased by the Recipient or its customers and
(ii) thereafter, on a quarterly basis, computed as of the close of
business each day at an annual rate of 0.25% of the average daily net
asset value of Class B shares held in accounts of the Recipient or its
customers. An exchange of shares does not entitle the Recipient to an
advance payment of the service fee. In the event Class B shares are
redeemed during the first year such shares are outstanding, the Recipient
will be obligated to repay a pro rata portion of the advance of the
service fee payment to the Distributor.
Although the Class B Plan permits the Distributor to retain both
the asset-based sales charges and the service fee on Class B shares, or
to pay Recipients the service fee on a quarterly basis, without payment
in advance, the Distributor presently intends to pay the service fee to
Recipients in the manner described above. A minimum holding period may
be established from time to time under the Class B Plan by the Board.
Initially, the Board has set no minimum holding period. All payments
under the Class B Plan become subject to the limitations imposed by the
Rules of Fair Practice of the National Association of Securities Dealers,
Inc. of asset-based sales charges and service fees. The Distributor
anticipates that it will take a number of years for it to recoup (from the
Fund's payments to the Distributor under the Class B Plan and recoveries
of the CDSC) the sales commissions paid to authorized brokers or dealers.
For the Fiscal period from May 1, 1993 through December 31, 1993, payments
under the Class B plan totaled $16,056.
Asset-based sales charge payments are designed to permit an
investor to purchase shares of the Fund without the assessment of a front-
end sales load and at the same time permit the Distributor to compensate
brokers and dealers in connection with the sale of Class B shares of the
Fund. The Distributor's actual distribution expenses for any given year
may exceed the aggregate of payments received pursuant to the Class B Plan
and from contingent deferred sales charges, and such expenses will be
carried forward and paid in future years. The Fund will be charged only
for interest expenses, carrying charges or other financial costs that are
directly related to the carry-forward of actual distribution expenses.
For example, if the Distributor incurred distribution expenses of $4
million in a given fiscal year, of which $2,000,000 was recovered in the
form of contingent deferred sales charges paid by investors and $1,600,000
were reimbursed in the form of payments made by the Fund to the
Distributor under the Class B Plan, the balance of $400,000 (plus
interest) would be subject to recovery in future fiscal years from such
sources.
In the event the Class B Plan is terminated, the Distributor is
entitled to continue to receive the asset-based sales charge of 0.75% per
annum on Class B shares sold prior to termination until the Distributor
has recovered its Class B distribution expenses incurred prior to
termination from such payments and from the Class B CDSC.
The Class B Plan allows for the carry-forward of distribution
expenses, to be recovered from asset-based sales charges in subsequent
fiscal periods, as described in the Prospectus. The asset-based sales
charge paid to the Distributor by the Fund under the Class B Plan is
intended to allow the Distributor to recoup the cost of sales commissions
paid to authorized brokers and dealers at the time of sale, plus financing
costs, as described in the Prospectus. Such payments may also be used to
pay for the following expenses in connection with the distribution of
Class B shares: (i) financing the advance of the service fee payment to
Recipients under the Class B Plan, (ii) compensation and expenses of
personnel employed by the Distributor to support distribution of Class B
shares, and (iii) costs of sales literature, advertising and prospectuses
(other than those furnished to current shareholders) and state "blue sky"
registration fees.
About Your Account
How To Buy Shares
Alternative Sales Arrangements - Class A and Class B Shares. The
Alternative Sales Arrangements permit an investor to choose the method of
purchasing shares that is more beneficial to the investor depending on the
amount of the purchase, the length of time the investor expects to hold
shares and other relevant circumstances. Investors should understand that
the purpose and function of the deferred sales charge and asset-based
sales charge with respect to Class B shares are the same as those of the
initial sales charge with respect to Class A shares. Any salesperson or
other person entitled to receive compensation for selling Fund shares may
receive different compensation with respect to one class of shares than
the other. The Distributor will not accept any order for $1 million or
more of Class B shares on behalf of a single investor (not including
dealer "street name" or omnibus accounts) because generally it will be
more advantageous for that investor to purchase Class A shares of the Fund
instead.
The two classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class
B shares and the dividends payable on Class B shares will be reduced by
incremental expenses borne solely by that class, including the asset-based
sales charge to which Class B shares are subject.
The conversion of Matured Class B shares to Class A shares is
subject to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or tax adviser, to the
effect that the conversion of Matured Class B shares does not constitute
a taxable event for the holder under Federal income tax law. If such a
revenue ruling or opinion is no longer available, the automatic conversion
feature may be suspended, in which event no further conversions of Matured
Class B shares would occur while such suspension remained in effect.
Although Matured Class B shares could then be exchanged for Class A shares
on the basis of relative net asset value of the two classes, without the
imposition of a sales charge or fee, such exchange could constitute a
taxable event for the holder, and absent such exchange, Class B shares
might continue to be subject to the asset-based sales charge for longer
than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A and Class B shares recognizes two
types of expenses. General expenses that do not pertain specifically to
either class are allocated pro rata to the shares of each class, based on
the percentage of the net assets of such class to the Fund's total net
assets, and then equally to each outstanding share within a given class.
Such general expenses include (i) management fees, (ii) legal, bookkeeping
and audit fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Additional Statements and other materials for current
shareholders, (iv) fees to unaffiliated Trustees, (v) custodian expenses,
(vi) share issuance costs, (vii) organization and start-up costs, (viii)
interest, taxes and brokerage commissions, and (ix) non-recurring
expenses, such as litigation costs. Other expenses that are directly
attributable to a class are allocated equally to each outstanding share
within that class. Such expenses include (i) Distribution and Service
Plan fees, (ii) incremental transfer and shareholder servicing agent fees
and expenses, (iii) registration fees and (iv) shareholder meeting
expenses, to the extent that such expenses pertain to a specific class
rather than to the Fund as a whole.
Determination of Net Asset Value Per Share. The net asset values per
share of Class A and Class B shares of the Fund are determined as of 4:00
P.M. New York time each day the New York Stock Exchange (the "NYSE") is
open by dividing the value of the Fund's net assets attributable to that
class by the number of shares of that class outstanding. The NYSE's most
recent annual holiday schedule (which is subject to change) states that
it will close on New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day; it
may also close on other days. Trading may occur in debt securities and
in foreign securities at times when the NYSE is closed (including weekends
and holidays, or after 4:00 P.M. on a regular business day). Because the
net asset values of the Fund will not be calculated at such times, if
securities held in the Fund's portfolio are traded at such times, the net
asset values per share of Class A and Class B shares of the Fund may be
significantly affected on such days when shareholders do not have the
ability to purchase or redeem shares.
The Trust's Board of Trustees has established procedures for the
valuation of the Fund's securities generally as follows: (i) equity
securities traded on a securities exchange or on NASDAQ are valued at the
last reported sale prices on their primary exchange or NASDAQ that day
(or, in the absence of sales that day, at values based on the last sale
prices of the preceding trading day or closing bid and asked prices); (ii)
NASDAQ and other unlisted equity securities for which last sales prices
are not regularly reported but for which over-the-counter market
quotations are readily available are valued at the highest closing bid
price at the time of valuation, or if no closing bid price is reported,
on the basis of a closing bid price obtained from a dealer who maintains
an active market in that security; (iii) securities (including restricted
securities) not having readily available market quotations are valued at
fair value under the Board's procedures; (iv) unlisted debt securities
having a remaining maturity in excess of 60 days are valued at the mean
between the asked and bid prices determined by a portfolio pricing service
approved by the Trust's Board of Trustees or obtained from an active
market maker on the basis of reasonable inquiry; (v) short-term debt
securities having a remaining maturity of 60 days or less are valued at
cost, adjusted for amortization of premiums and accretion of discounts;
and (vi) securities traded on foreign exchanges or in foreign over-the-
counter markets are valued as determined by a portfolio pricing service,
approved by the Board, based on last sales prices reported on a principal
exchange or the mean between closing bid and asked prices and reflect
prevailing rates of exchange taken from the closing price on the London
foreign exchange market that day. Foreign currency will be valued as
close to the time fixed for the valuation date as is reasonably
practicable. The value of securities denominated in foreign currency will
be converted to U.S. dollars at the prevailing rates of exchange at the
time of valuation.
Trading in securities on European and Asian exchanges and over-
the-counter markets is normally completed before the close of the NYSE.
Events affecting the values of foreign securities traded in such markets
that occur between the time their prices are determined and the close of
the NYSE will not be reflected in the Fund's calculation of net asset
value unless the Board of Trustees, the Manager or the Sub-Adviser, under
procedures established by the Board of Trustees, determines that the
particular event would materially affect the Fund's net asset value, in
which case an adjustment would be made.
In the case of U.S. Government Securities, mortgage-backed
securities, foreign fixed-income securities and corporate bonds, when last
sale information is not generally available, such pricing procedures may
include "matrix" comparisons to the prices for comparable instruments on
the basis of quality, yield, maturity, and other special factors involved.
The Trust's Board of Trustees has authorized the Manager and/or the Sub-
Adviser to employ a pricing service to price U.S. Government Securities,
mortgage-backed securities, foreign government securities and corporate
bonds. The Trustees will monitor the accuracy of such pricing services
by comparing prices used for portfolio evaluation to actual sales prices
of selected securities.
Calls, puts and Futures are valued at the last sale prices on the
principal exchanges or on the NASDAQ National Market on which they are
traded, or, if there are no sales that day, in accordance with (i) above.
Forward currency contracts are valued at the closing price on the London
foreign exchange market. When the Fund writes an option, an amount equal
to the premium received by the Fund is included in its Statement of Assets
and Liabilities as an asset, and an equivalent deferred credit is included
in the liability section. The deferred credit is adjusted ("marked-to-
market") to reflect the current market value of the option.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $25.00. Shares will be purchased on the regular business
day the Distributor is instructed to initiate the Automated Clearing House
transfer to buy the shares. Dividends will begin to accrue on such shares
on the day the Fund receives Federal Funds for such purchase through the
ACH system before 4:00 P.M., which is normally 3 days after the ACH
transfer is initiated. The Distributor and the Fund are not responsible
for any delays. If the Federal Funds are received after 4:00 P.M.,
dividends will begin to accrue on the next regular business day after such
Federal Funds are received.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Right of Accumulation
and Letters of Intent because of the economies of sales efforts and
reduction in expenses realized by the Distributor, dealers and brokers
making such sales. No sales charge is imposed in certain other
circumstances described in the Prospectus because the Distributor incurs
little or no selling expenses. The term "immediate family" refers to
one's spouse, children, grandchildren, grandparents, parents, parents-in-
law, brothers and sisters, sons- and daughters-in-law, a sibling's spouse
and a spouse's siblings.
- The OppenheimerFunds. The OppenheimerFunds are those mutual
funds for which the Distributor acts as the distributor or the sub-
distributor and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Time Fund
Oppenheimer Target Fund
Oppenheimer Special Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion High Yield Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Global Fund
Oppenheimer Global Bio-Tech Fund
Oppenheimer Global Environment Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Diversified Income Fund
the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Oppenheimer Tax-Exempt Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
There is an initial sales charge on the purchase of Class A shares
of each of the OppenheimerFunds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund
shares may be subject to a contingent deferred sales charge).
- Letters of Intent. A Letter of Intent ("Letter") is the
investor's statement of intention to purchase Class A shares of the Fund
(and other eligible OppenheimerFunds) sold with a front-end sales charge
during the 13-month period from the investor's first purchase pursuant to
the Letter (the "Letter of Intent period"), which may, at the investor's
request, include purchases made up to 90 days prior to the date of the
Letter. The Letter states the investor's intention to make the aggregate
amount of purchases (excluding any purchases made by reinvestments of
dividends or distributions or purchases made at net asset value without
sales charge), which together with the investor's holdings of such funds
(calculated at their respective public offering prices calculated on the
date of the Letter) will equal or exceed the amount specified in the
Letter to obtain the reduced sales charge rate (as set forth in the
Prospectus) applicable to purchases of shares in that amount (the
"intended amount"). Each purchase under the Letter will be made at the
public offering price applicable to a single lump-sum purchase of shares
in the intended amount, as described in the Prospectus.
In submitting a Letter, the investor makes no commitment to
purchase shares, but if the investor's purchases of shares within the
Letter of Intent period, when added to the value (at offering price) of
the investor's holdings of shares on the last day of that period, do not
equal or exceed the intended amount, the investor agrees to pay the
additional amount of sales charge applicable to such purchases, as set
forth in "Terms of Escrow," below (as those terms may be amended from time
to time). The investor agrees that shares equal in value to 5% of the
intended amount will be held in escrow by the Transfer Agent subject to
the Terms of Escrow. Also, the investor agrees to be bound by the terms
of the Prospectus, this Statement of Additional Information and the
Application used for such Letter of Intent, and if such terms are amended,
as they may be from time to time by the Fund, that those amendments will
apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended amount, the commissions
previously paid to the dealer of record for the account and the amount of
sales charge retained by the Distributor will be adjusted to the rates
applicable to actual total purchases. If total eligible purchases during
the Letter of Intent period exceed the intended amount and exceed the
amount needed to qualify for the next sales charge rate reduction set
forth in the applicable prospectus, the sales charges paid will be
adjusted to the lower rate, but only if and when the dealer returns to the
Distributor the excess of the amount of commissions allowed or paid to the
dealer over the amount of commissions that apply to the actual amount of
purchases. The excess commissions returned to the Distributor will be
used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly
after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to advise the Distributor about the Letter
in placing any purchase orders for the investor during the Letter of
Intent period. All of such purchases must be made through the
Distributor.
- Terms of Escrow that Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in value
to 5% of the intended amount specified in the Letter shall be held in
escrow by the Transfer Agent. For example, if the intended amount
specified under the Letter is $50,000, the escrow shall be shares valued
in the amount of $2,500 (computed at the public offering price adjusted
for a $50,000 purchase). Any dividends and capital gains distributions
on the escrowed shares will be credited to the investor's account.
2. If the total minimum investment specified under the Letter
is completed within the thirteen-month Letter of Intent period, the
escrowed shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent
period the total purchases pursuant to the Letter are less than the
intended amount specified in the Letter, the investor must remit to the
Distributor an amount equal to the difference between the dollar amount
of sales charges actually paid and the amount of sales charges which would
have been paid if the total amount purchased had been made at a single
time. Such sales charge adjustment will apply to any shares redeemed
prior to the completion of the Letter. If such difference in sales
charges is not paid within twenty days after a request from the
Distributor or the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares necessary
to realize such difference in sales charges. Full and fractional shares
remaining after such redemption will be released from escrow. If a
request is received to redeem escrowed shares prior to the payment of such
additional sales charge, the sales charge will be withheld from the
redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes
and appoints the Transfer Agent as attorney-in-fact to surrender for
redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the
holding of which may be counted toward completion of the Letter) do not
include any shares sold without a front-end sales charge or not subject
to a Class A contingent deferred sales charge unless (for the purpose of
determining completion of the obligation to purchase shares under the
Letter) the shares were acquired in exchange for shares of one of the
OppenheimerFunds whose shares were acquired by payment of a sales charge.
6. Shares held in escrow hereunder will automatically be
exchanged for shares of another fund to which an exchange is requested,
as described in the section of the Prospectus entitled "Exchange
Privilege," and the escrow will be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank
account, a check (minimum $25) for the initial purchase must accompany the
application. Shares purchased by Asset Builder Plan payments from bank
accounts are subject to the redemption restrictions for recent purchases
described in "How To Sell Shares," in the Prospectus. Asset Builder Plans
also enable shareholders of Oppenheimer Tax-Exempt Cash Reserves or
Oppenheimer Cash Reserves to use those accounts for monthly automatic
purchases of shares of up to four other Eligible Funds.
There is a sales charge on the purchase of certain Eligible Funds.
An application should be obtained from the Transfer Agent, completed and
returned, and a prospectus of the selected fund(s) (available from the
Distributor) should be obtained before initiating Asset Builder payments.
The amount of the Asset Builder investment may be changed or the automatic
investments may be terminated at any time by writing to the Transfer
Agent. A reasonable period (approximately 15 days) is required after the
Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans
at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the
Fund's shares (for example, when a purchase check is returned to the Fund
unpaid) causes a loss to be incurred when the net asset value of the
Fund's shares on the cancellation date is less than on the purchase date.
That loss is equal to the amount of the decline in the net asset value per
share multiplied by the number of shares in the purchase order. The
investor is responsible for that loss. If the investor fails to
compensate the Fund for the loss, the Distributor will do so. The Fund
may reimburse the Distributor for that amount by redeeming shares from any
account registered in that investor's name, or the Fund or the Distributor
may seek other redress.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and conditions for
redemptions set forth in the Prospectus.
- Payments "In Kind". The Prospectus states that payment for
shares tendered for redemption is ordinarily made in cash. However, if the
Board of Trustees of the Trust determines that it would be detrimental to
the best interests of the remaining shareholders of the Fund to make
payment of a redemption order wholly or partly in cash, the Fund may pay
the redemption proceeds in whole or in part by a distribution "in kind"
of securities from the portfolio of the Fund, in lieu of cash, in
conformity with applicable rules of the Securities and Exchange
Commission. The Fund has elected to be governed by Rule 18f-1 under the
Investment Company Act, pursuant to which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net assets
of the Fund during any 90-day period for any one shareholder. If shares
are redeemed in kind, the redeeming shareholder might incur brokerage or
other costs in selling the securities for cash. The method of valuing
securities used to make redemptions in kind will be the same as the method
the Fund uses to value it portfolio securities described above under
"Determination of Net Asset Value Per Share" and such valuation will be
made as of the time the redemption price is determined.
- Involuntary Redemptions. The Trust's Board of Trustees has the
right to cause the involuntary redemption of the shares held in any
account if the aggregate net asset value of such shares is less than
$1,000 or such lesser amount as the Board may fix. The Board of Trustees
will not cause the involuntary redemption of shares in an account if the
aggregate net asset value of such shares has fallen below the stated
minimum solely as a result of market fluctuations. Should the Board elect
to exercise this right, it may also fix, in accordance with the Investment
Company Act, the requirements for any notice to be given to the
shareholders in question (not less than 30 days), or may set requirements
for permission to increase the investment, and other terms and conditions
so that the shares would not be involuntarily redeemed.
Reinvestment Privilege. Within six months of a redemption, a
shareholder may reinvest all or part of the redemption proceeds of (i)
Class A shares, or (ii) Class B shares that were subject to the Class B
contingent deferred sales charge when redeemed, in Class A shares of the
Fund or any of the other OppenheimerFunds into which shares of the Fund
are exchangeable as described below, at the net asset value next computed
after receipt by the Transfer Agent of the reinvestment order. The
shareholder must ask the Distributor for such privilege at the time of
reinvestment. Any capital gain that was realized when the shares were
redeemed is taxable, and reinvestment will not alter any capital gains tax
payable on that gain. If there has been a capital loss on the redemption,
some or all of the loss may not be tax deductible, depending on the timing
and amount of the reinvestment. Under the Internal Revenue Code, if the
redemption proceeds of Fund shares on which a sales charge was paid are
reinvested in shares of the Fund or another of the OppenheimerFunds within
90 days of payment of the sales charge, the shareholder's basis in the
shares of the Fund that were redeemed may not include the amount of the
sales charge paid. That would reduce the loss or increase the gain
recognized from the redemption. However, in that case, the sales charge
would be added to the basis of the shares acquired by the reinvestment of
the redemption proceeds. The Fund may amend, suspend or cease offering
this reinvestment privilege at any time as to shares redeemed after the
date of such amendment, suspension or cessation.
Transfer of Shares. Shares are not subject to the payment of a contingent
deferred sales charge of either class at the time of transfer to the name
of another person or entity (whether the transfer occurs by absolute
assignment, gift or bequest, not involving, directly or indirectly, a
public sale). The transferred shares will remain subject to the
contingent deferred sales charge, calculated as if the transferee
shareholder had acquired the transferred shares in the same manner and at
the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the
account would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus under
"How to Buy Shares" for the imposition of the Class B contingent deferred
sales charge will be followed in determining the order in which shares are
transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, or pension or
profit-sharing plans should be addressed to "Trustee, OppenheimerFunds
Retirement Plans," c/o the Transfer Agent at its address listed in "How
To Sell Shares" in the Prospectus. The request must: (i) state the reason
for the distribution; (ii) state the owner's awareness of tax penalties
if the distribution is premature; and (iii) conform to the requirements
of the plan and the Fund's other redemption requirements. Participants
(other than self-employed persons) in OppenheimerFunds-sponsored pension
or profit-sharing plans may not directly request redemption of their
accounts. The employer or plan administrator must sign the request.
Distributions from pension and profit sharing plans are subject to special
requirements under the Internal Revenue Code and certain documents
(available from the Transfer Agent) must be completed before the
distribution may be made. Distributions from retirement plans are subject
to withholding requirements under the Internal Revenue Code, and IRS Form
W-4P (available from the Transfer Agent) must be submitted to the Transfer
Agent with the distribution request, or the distribution may be delayed.
Unless the shareholder has provided the Transfer Agent with a certified
tax identification number, the Internal Revenue Code requires that tax be
withheld from any distribution even if the shareholder elects not to have
tax withheld. The Fund, the Manager, the Distributor, the Trustee and the
Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not
be responsible for any tax penalties assessed in connection with a
distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers.
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price will be the net asset
value next computed after the receipt of an order placed by such dealer
or broker, except that orders received from dealers or brokers after 4:00
P.M. on a regular business day will be processed at that day's net asset
value if such orders were received by the dealer or broker from its
customers prior to 4:00 P.M., and were transmitted to and received by the
Distributor prior to its close of business that day (normally 5:00 P.M.).
Payment ordinarily will be made within seven days after the Distributor's
receipt of the required documents, with signature(s) guaranteed as
described above.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the
Fund valued at $5,000 or more can authorize the Transfer Agent to redeem
shares (minimum $50) automatically on a monthly, quarterly, semi-annual
or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are by check
payable to all shareholders of record and sent to the address of record
for the account (and if the address has not been changed within the prior
30 days). Required minimum distributions from OppenheimerFunds-sponsored
retirement plans may not be arranged on this basis. Payments are normally
made by check, but shareholders having AccountLink privileges (see "How
To Buy Shares") may arrange to have Automatic Withdrawal Plan payments
transferred to the bank account designated on the OppenheimerFunds New
Account Application or signature-guaranteed instructions. The Fund cannot
guarantee receipt of the payment on the date requested and reserves the
right to amend, suspend or discontinue offering such plans at any time
without prior notice. Because of the sales charge assessed on Class A
share purchases, shareholders should not make regular additional Class A
purchases while participating in an Automatic Withdrawal Plan. Class B
shareholders should not establish withdrawal plans, because of the
imposition of the Class B CDSC on such withdrawals (except where the Class
B CDSC is waived as described in "Class B Contingent Deferred Sales
Charge").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such plans,
as stated below and in the provisions of the OppenheimerFunds Application
relating to such Plans, as well as the Prospectus. These provisions may
be amended from time to time by the Fund and/or the Distributor. When
adopted, such amendments will automatically apply to existing Plans.
- Automatic Exchange Plans. Shareholders can authorize the
Transfer Agent (on the OppenheimerFunds Application or signature-
guaranteed instructions) to exchange a pre-determined amount of shares of
the Fund for shares (of the same class) of other OppenheimerFunds
automatically on a monthly, quarterly, semi-annual or annual basis under
an Automatic Exchange Plan. The minimum amount that may be exchanged to
each other fund account is $25. Exchanges made under these plans are
subject to the restrictions that apply to exchanges as set forth in
"Exchange Privilege" in the Prospectus and "How to Exchange Shares" below
in this Statement of Additional Information.
- Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales
charge will be redeemed first and thereafter shares acquired with
reinvested dividends and capital gains distributions will be redeemed
next, followed by shares acquired with a sales charge, to the extent
necessary to make withdrawal payments. Depending upon the amount
withdrawn, the investor's principal may be depleted. Payments made under
such plans should not be considered as a yield or income on your
investment. It may not be desirable to purchases additional Class A
shares while making automatic withdrawals because of the sales charges
that apply to purchases when made. Accordingly, a shareholder normally
may not maintain an Automatic Withdrawal Plan while simultaneously making
regular purchases of Class A shares.
The transfer agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the "Planholder")
who executed the Plan authorization and application submitted to the
Transfer Agent. The Transfer Agent shall incur no liability to the
Planholder for any action taken or omitted by the Transfer Agent in good
faith to administer the Plan. Certificates will not be issued for shares
of the Fund purchased for and held under the Plan, but the Transfer Agent
will credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan application so
that the shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions
of capital gains must be reinvested in shares of the Fund, which will be
done at net asset value without a sales charge. Dividends on shares held
in the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be
made at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (the date selected for receipt is an approximate
date), according to the choice specified in writing by the Planholder.
The amount and the interval of disbursement payments and the
address to which checks are to be mailed or AccountLink payments are to
be sent may be changed at any time by the Planholder by writing to the
Transfer Agent. The Planholder should allow at least two weeks' time in
mailing such notification for the requested change to be put in effect.
The Planholder may, at any time, instruct the Transfer Agent by written
notice (in proper form in accordance with the requirements of the then-
current Prospectus of the Fund) to redeem all, or any part of, the shares
held under the Plan. In that case, the Transfer Agent will redeem the
number of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by
writing to the Transfer Agent. A Plan may also be terminated at any time
by the Transfer Agent upon receiving directions to that effect from the
Fund. The Transfer Agent will also terminate a Plan upon receipt of
evidence satisfactory to it of the death or legal incapacity of the
Planholder. Upon termination of a Plan by the Transfer Agent or the Fund,
shares that have not been redeemed from the account will be held in
uncertificated form in the name of the Planholder, and the account will
continue as a dividend-reinvestment, uncertificated account unless and
until proper instructions are received from the Planholder or his or her
executor or guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated
form. Upon written request from the Planholder, the Transfer Agent will
determine the number of shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the
Fund, the Planholder will be deemed to have appointed any successor
transfer agent to act as agent in administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of
OppenheimerFunds having more than one class of shares may be exchanged
only for shares of the same class of other OppenheimerFunds. All of the
OppenheimerFunds offer Class A shares, but only the following other
OppenheimerFunds offer Class B shares:
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Investment Grade Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer High Yield Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Cash Reserves (Class B shares are only
available by exchange)
Oppenheimer Special Fund
Oppenheimer Equity Income Fund
Oppenheimer Global Fund
Oppenheimer Discovery Fund
Class A shares of OppenheimerFunds may be exchanged for shares of
any Money Market Fund; shares of any Money Market Fund purchased without
a sales charge may be exchanged for shares of OppenheimerFunds offered
with a sales charge upon payment of the sales charge (or, if applicable,
may be used to purchase shares of OppenheimerFunds subject to a CDSC); and
shares of this Fund acquired by reinvestment of dividends or distributions
from any other of the OppenheimerFunds or from any unit investment trust
for which reinvestment arrangements have been made with the Distributor
may be exchanged at net asset value for shares of any of the
OppenheimerFunds. No CDSC is imposed on exchanges of shares of either
class purchased subject to a CDSC. However, when Class A shares acquired
by exchange of Class A shares purchased subject to a Class A CDSC are
redeemed within 18 months of the end of the calendar month of the initial
purchase of the exchanged Class A shares, the Class A CDSC is imposed on
the redeemed shares (see "Class A Contingent Deferred Sales Charge" in the
Prospectus), and the Class B CDSC is imposed on Class B shares redeemed
within six years of the initial purchase of the exchanged Class B shares.
The Fund reserves the right to reject telephone or written
exchange requests submitted in bulk by anyone on behalf of 10 or more
accounts. The Fund may accept requests for exchanges of up to 50 accounts
per day from representatives of authorized dealers that qualify for this
privilege. In connection with any exchange request, the number of shares
exchanged may be less than the number requested if the exchange or the
number requested would include shares subject to a restriction cited in
the Prospectus or this Statement of Additional Information or shares
covered by a share certificate that is not tendered with the request. In
those cases, only the shares available for exchange without restriction
will be exchanged.
When Class B shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the
imposition of the Class B contingent deferred sales charge will be
followed in determining the order in which the shares are exchanged.
Shareholders should take into account the effect of any exchange on the
applicability and rate of any contingent deferred sales charge that might
be imposed in the subsequent redemption of remaining shares. Shareholders
owning shares of both classes must specify whether they intend to exchange
Class A or Class B shares.
When exchanging shares by telephone, the shareholder must either
have an existing account in, or acknowledge receipt of a prospectus of,
the fund to which the exchange is to be made. For full or partial
exchanges of an account made by telephone, any special account features
such as Asset Builder Plans, Automatic Withdrawal Plans and retirement
plan contributions will be switched to the new account unless the Transfer
Agent is instructed otherwise. If all telephone lines are busy (which
might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by
telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day
the Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it (for example, if the receipt of multiple exchange
request from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different OppenheimerFunds available for exchange have
different investment objectives, policies and risks, and a shareholder
should assure that the Fund selected is appropriate for his or her
investment and should be aware of the tax consequences of an exchange.
For federal tax purposes, an exchange transaction is treated as a
redemption of shares of one fund and a purchase of shares of another.
"Reinvestment Privilege," above, discusses some of the tax consequences
of reinvestment of redemption proceeds in such cases. The Fund, the
Distributor, and the Transfer Agent are unable to provide investment, tax
or legal advice to a shareholder in connection with an exchange request
or any other transaction.
Dividends, Capital Gains And Taxes
Dividends and Distributions. Dividends will be payable on shares held
of record at the time of the previous determination of net asset value,
or as otherwise described in "How to Buy Shares." Dividends will be
declared on shares repurchased by a dealer or broker for four business
days following the trade date (i.e., to and including the day prior to
settlement of the repurchase). If all shares in an account are redeemed,
all dividends accrued on shares of the same class in the account will be
paid together with the redemption proceeds.
Dividends, distributions and the proceeds of the redemption of
Fund shares represented by checks returned to the Transfer Agent by the
Postal Service as undeliverable will be invested in shares of Oppenheimer
Money Market Fund, Inc., as promptly as possible after the return of such
checks to the Transfer Agent, to enable the investor to earn a return on
otherwise idle funds.
Tax Status of the Fund's Dividends and Distributions. The Federal
tax treatment of the Fund's dividends and capital gains distributions is
explained in the Prospectus under the caption "Dividends, Capital Gains
and Taxes." Special provisions of the Internal Revenue Code govern the
eligibility of the Fund's dividends for the dividends-received deduction
for corporate shareholders. Long-term capital gains distributions are not
eligible for the deduction. In addition, the amount of dividends paid by
the Fund which may qualify for the deduction is limited to the aggregate
amount of qualifying dividends which the Fund derives from its portfolio
investments that the Fund has held for a minimum period, usually 46 days.
A corporate shareholder will not be eligible for the deduction on
dividends paid on shares held for 45 days or less. To the extent the
Fund's dividends are derived from its gross income from option premiums,
interest income or short-term gains from the sale of securities, or
dividends from foreign corporations, its dividends will not qualify for
the deduction. It is expected that for the most part the Fund's dividends
will not qualify, because of the nature of the investments held by the
Fund in its portfolio.
The amount of a class's distributions may vary from time to time
depending on market conditions, the composition of the Fund's portfolio,
and expenses borne by the Fund or borne separately by a class, as
described in "Alternative Sales Arrangements -- Class A and Class B,"
above. Dividends are calculated in the same manner, at the same time and
on the same day for shares of each class. However, dividends on Class B
shares are expected to be lower as a result of the asset-based sales
charge on Class B shares, and Class B dividends will also differ in amount
as a consequence of any difference in net asset value between Class A and
Class B shares.
Distributions may be made annually in December out of any net
short-term or long-term capital gains realized from the sale of
securities, premiums from expired calls written by the Fund and net
profits from Hedging Instruments and closing purchase transactions
realized in the twelve months ending on October 31 of the current year.
Any difference between the net asset value of Class A and Class B shares
will be reflected in such distributions. Distributions from net short-
term capital gains are taxable to shareholders as ordinary income and when
paid by the Fund are considered "dividends." The Fund may make a
supplemental distribution of capital gains and ordinary income following
the end of its fiscal year. Any long-term capital gains distributions
will be identified separately when paid and when tax information is
distributed by the Fund. If prior distributions must be re-characterized
at the end of the fiscal year as a result of the effect of the Fund's
investment policies, shareholders may have a non-taxable return of
capital, which will be identified in notices to shareholders. There is
no fixed dividend rate and there can be no assurance as to the payment of
any dividends or the realization of any capital gains.
If the Fund qualifies as a "regulated investment company" under
the Internal Revenue Code, it will not be liable for Federal income taxes
on amounts paid by it as dividends and distributions. The Fund qualified
as a regulated investment company in its last fiscal year and intends to
qualify in future years, but reserves the right not to qualify. The
Internal Revenue Code contains a number of complex tests to determine
whether the Fund will qualify, and the Fund might not meet those tests in
a particular year. For example, if the Fund derives 30% or more of its
gross income from the sale of securities held less than three months, it
may fail to qualify (see "Tax Aspects of Covered Calls and Hedging
Instruments," above). If it does not qualify, the Fund will be treated for
tax purposes as an ordinary corporation and will receive no tax deduction
for payments of dividends and distributions made to shareholders.
Under the Internal Revenue Code, by December 31 each year the Fund
must distribute 98% of its taxable investment income earned from January
1 through December 31 of that year and 98% of its capital gains realized
in the period from November 1 of the prior year through October 31 of the
current year, or else the Fund must pay an excise tax on the amounts not
distributed. While it is presently anticipated that the Fund will meet
those requirements, the Trust's Board and Manager might determine in a
particular year that it would be in the best interest of shareholders for
the Fund not to make such distributions at the required levels and to pay
the excise tax on the undistributed amounts. That would reduce the amount
of income or capital gains available for distribution to shareholders.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may
elect to reinvest all dividends and/or capital gains distributions in
shares of the same class of any of the other OppenheimerFunds listed in
"Reduced Sales Charges" above at net asset value without sales charge.
Class B shareholders should be aware that as of the date of this Statement
of Additional Information, not all OppenheimerFunds offer Class B shares.
The names of funds that do offer Class B shares can be obtained by calling
the Distributor at 1-800-525-7048. To elect this option, the shareholder
must notify the Transfer Agent in writing and either have an existing
account in the fund selected for reinvestment or must obtain a prospectus
for that fund and an application from the Distributor to establish an
account. The investment will be made at the net asset value per share in
effect at the close of business on the payable date of the dividend or
distribution. Dividends and/or distributions from certain of the
OppenheimerFunds may be invested in shares of the Fund on the same basis.
Additional Information About The Fund
The Custodian. The Bank of New York is the Custodian of the Fund's
assets. The Custodian's responsibilities include safeguarding and
controlling the Fund's portfolio securities, collecting income on the
portfolio securities and handling the delivery of such securities to and
from the Fund. The Manager has represented to the Fund that the banking
relationships between the Manager and the Custodian have been and will
continue to be unrelated to and unaffected by the relationship between the
Fund and the Custodian. It will be the practice of the Fund to deal with
the Custodian in a manner uninfluenced by any banking relationship the
Custodian may have with the Manager and its affiliates.
Independent Auditors. The independent auditors of the Fund audit the
Fund's financial statements and perform other related audit services.
They also act as auditors for certain other funds advised by the Manager
and its affiliates.
<PAGE>
INDEPENDENT AUDITORS' REPORT
- -------------------------------------------------------------------------------
The Board of Trustees and Shareholders of Oppenheimer
Value Stock Fund:
We have audited the accompanying statement of
assets and liabilities, including the statement of
investments, of Oppenheimer Value Stock Fund as of
December 31, 1993, the related statement of operations
for the year then ended, the statements of changes in
net assets for the years ended December 31, 1993 and
1992, and the financial highlights for the period
January 1, 1991 to December 31, 1993. These financial
statements and financial highlights are the
responsibility of the Fund's management. Our
responsibility is to express an opinion on these
financial statements and financial highlights based on
our audits. The financial highlights (except for total
return) for the period December 22, 1986 to December
31, 1990 were audited by other auditors whose report
dated February 4, 1991, expressed an unqualified
opinion on those financial highlights.
We conducted our audits in accordance with
generally accepted auditing standards. Those standards
require that we plan and perform the audit to obtain
reasonable assurance about whether the financial
statements and financial highlights are free of
material misstatement. An audit also includes
examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements.
Our procedures included confirmation of securities
owned at December 31, 1993 by correspondence with the
custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements and
financial highlights present fairly, in all material
respects, the financial position of Oppenheimer Value
Stock Fund at December 31, 1993, the results of its
operations, the changes in its net assets, and the
financial highlights for the respective stated periods,
in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE
Denver, Colorado
January 21, 1994
<PAGE>
STATEMENT OF INVESTMENTS December 31, 1993
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM NOTES-9.1%
- -----------------------------------------------------------------------------------------------------------------------------
Caterpillar Financial Services Corp., 3.40%, 1/6/94 $2,000,000 $1,999,056
------------------------------------------------------------------------------------------
ConAgra, Inc., 3.40%, 1/11/94 910,000 909,140
------------------------------------------------------------------------------------------
Corning, Inc., 3.50%, 1/5/94 1,900,000 1,899,261
------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 3.05%, 1/5/94 645,000 645,000
------------------------------------------------------------------------------------------
Indiana Michigan Power Co., 3.50%, 1/4/94 1,330,000 1,329,612
------------------------------------------------------------------------------------------
Public Service Co. of Colorado, 3.70%, 1/7/94 1,870,000 1,868,847
----------
Total Short-Term Notes (Cost $8,650,916) 8,650,916
SHARES
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS-89.5%
- -----------------------------------------------------------------------------------------------------------------------------
BASIC MATERIALS-7.1%
- -----------------------------------------------------------------------------------------------------------------------------
ALUMINUM-0.9% Reynolds Metals Co. 18,000 816,750
- -----------------------------------------------------------------------------------------------------------------------------
CHEMICALS-1.3% Du Pont (E.I.) De Nemours & Co. 25,000 1,206,250
- -----------------------------------------------------------------------------------------------------------------------------
CHEMICALS: SPECIALTY-1.9% Lubrizol Corp. (The) 25,500 870,187
------------------------------------------------------------------------------------------
Nalco Chemical Co. 26,500 993,750
----------
1,863,937
- -----------------------------------------------------------------------------------------------------------------------------
METAL: MISCELLANEOUS-1.2% Phelps Dodge Corp. 23,500 1,145,625
- -----------------------------------------------------------------------------------------------------------------------------
PAPER AND FOREST PRODUCTS-1.8% Westvaco Corp. 23,000 819,375
------------------------------------------------------------------------------------------
Willamette Industries, Inc. 19,000 940,500
----------
1,759,875
- -----------------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS-15.9%
- -----------------------------------------------------------------------------------------------------------------------------
AUTOMOBILES-1.8% Ford Motor Co. 27,000 1,741,500
- -----------------------------------------------------------------------------------------------------------------------------
AUTO PARTS: AFTER MARKET-1.9% Genuine Parts Co. 48,500 1,824,813
- -----------------------------------------------------------------------------------------------------------------------------
HARDWARE AND TOOLS-1.3% Stanley Works (The) 28,500 1,268,250
- -----------------------------------------------------------------------------------------------------------------------------
LEISURE TIME-1.4% Eastman Kodak Co. 24,800 1,388,800
- -----------------------------------------------------------------------------------------------------------------------------
PUBLISHING-3.6% Dun & Bradstreet Corp. (The) 30,000 1,848,750
------------------------------------------------------------------------------------------
McGraw-Hill, Inc. 23,000 1,555,375
----------
3,404,125
- -----------------------------------------------------------------------------------------------------------------------------
RETAIL STORES: DEPARTMENT May Department Stores Co. 40,500 1,594,687
STORES-1.7%
- -----------------------------------------------------------------------------------------------------------------------------
RETAIL STORES: GENERAL K Mart Corp. 42,100 894,625
------------------------------------------------------------------------------------------
MERCHANDISE CHAINS-2.4% Penney (J.C.) Co., Inc. 26,500 1,387,938
----------
2,282,563
- -----------------------------------------------------------------------------------------------------------------------------
RETAIL: SPECIALTY-0.7% Rite Aid Corp. 40,000 635,000
- -----------------------------------------------------------------------------------------------------------------------------
TEXTILES: APPAREL V.F. Corp. 22,500 1,037,812
MANUFACTURERS-1.1%
- -----------------------------------------------------------------------------------------------------------------------------
CONSUMER NON-CYCLICALS-10.8%
- -----------------------------------------------------------------------------------------------------------------------------
BEVERAGES: ALCOHOLIC-1.4% Brown-Forman Corp., Cl. B 15,500 1,352,375
- -----------------------------------------------------------------------------------------------------------------------------
DRUGS-2.3% Pfizer, Inc. 32,500 2,242,500
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
FOOD PROCESSING-2.9% CPC International, Inc. 28,000 $1,333,500
------------------------------------------------------------------------------------------
Gerber Products Co. 19,000 539,125
------------------------------------------------------------------------------------------
Pioneer Hi-Bred International, Inc. 21,000 819,000
----------
2,691,625
- -----------------------------------------------------------------------------------------------------------------------------
HEALTHCARE: DIVERSIFIED-2.0% Bristol-Myers Squibb Co. 33,000 1,918,125
- -----------------------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS-1.0% Clorox Co. (The) 18,300 992,775
- -----------------------------------------------------------------------------------------------------------------------------
MEDICAL PRODUCTS-1.2% Becton, Dickinson & Co. 30,600 1,097,775
- -----------------------------------------------------------------------------------------------------------------------------
ENERGY-7.9%
- -----------------------------------------------------------------------------------------------------------------------------
OIL: INTEGRATED DOMESTIC-1.7% Atlantic Richfield Co. 10,500 1,105,125
------------------------------------------------------------------------------------------
USX-Marathon Group 32,000 528,000
----------
1,633,125
- -----------------------------------------------------------------------------------------------------------------------------
OIL: INTEGRATED Amoco Corp. 26,500 1,401,187
INTERNATIONAL-6.2% ------------------------------------------------------------------------------------------
Chevron Corp. 22,000 1,916,750
------------------------------------------------------------------------------------------
Mobil Corp. 19,500 1,540,500
------------------------------------------------------------------------------------------
Royal Dutch Petroleum Co. 10,200 1,064,625
----------
5,923,062
- -----------------------------------------------------------------------------------------------------------------------------
FINANCIAL-10.7%
- -----------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES: American Express Co. 40,500 1,250,438
MISCELLANEOUS-1.3%
- -----------------------------------------------------------------------------------------------------------------------------
INSURANCE: LIFE-1.0% Jefferson-Pilot Corp. 19,850 930,469
- -----------------------------------------------------------------------------------------------------------------------------
INSURANCE: MULTI-LINE-1.1% Unitrin, Inc. 23,500 1,022,250
- -----------------------------------------------------------------------------------------------------------------------------
INSURANCE: PROPERTY AND Chubb Corp. (The) 9,500 739,812
CASUALTY-2.5% ------------------------------------------------------------------------------------------
SAFECO Corp. 30,000 1,650,000
----------
2,389,812
- -----------------------------------------------------------------------------------------------------------------------------
MAJOR BANKS: REGIONAL-4.8% Comerica, Inc. 51,000 1,357,875
------------------------------------------------------------------------------------------
CoreStates Financial Corp. 56,000 1,463,000
------------------------------------------------------------------------------------------
Norwest Corp. 38,000 926,250
------------------------------------------------------------------------------------------
Wachovia Corp. 25,540 855,590
----------
4,602,715
- -----------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL-16.5%
- -----------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES-1.4% Donnelley (R.R.) & Sons Co. 28,500 887,062
------------------------------------------------------------------------------------------
Omnicom Group, Inc. 10,000 462,500
----------
1,349,562
- -----------------------------------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT-8.4% AMP, Inc. 40,000 2,525,000
------------------------------------------------------------------------------------------
General Electric Co. 29,000 3,041,375
------------------------------------------------------------------------------------------
Grainger (W.W.), Inc. 22,000 1,265,000
------------------------------------------------------------------------------------------
Hubbell, Inc., Cl.B 22,021 1,191,887
----------
8,023,262
</TABLE>
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
MANUFACTURING: DIVERSIFIED Crane Co. 17,800 $ 440,550
INDUSTRIALS-5.2% ------------------------------------------------------------------------------------------
Dover Corp. 19,500 1,184,625
------------------------------------------------------------------------------------------
General Signal Corp. 37,500 1,289,063
------------------------------------------------------------------------------------------
Harsco Corp. 24,000 975,000
------------------------------------------------------------------------------------------
Parker-Hannifin Corp. 29,000 1,094,750
----------
4,983,988
- -----------------------------------------------------------------------------------------------------------------------------
RAILROADS-1.5% Norfolk Southern Corp. 20,000 1,410,000
- -----------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY-13.3%
AEROSPACE/DEFENSE-4.1% Boeing Co. (The) 14,700 635,775
------------------------------------------------------------------------------------------
Lockheed Corp. 25,000 1,706,250
------------------------------------------------------------------------------------------
Rockwell International Corp. 22,000 816,750
------------------------------------------------------------------------------------------
TRW, Inc. 10,500 727,125
----------
3,885,900
- -----------------------------------------------------------------------------------------------------------------------------
COMPUTER SYSTEMS-0.9% International Business Machines Corp. 14,300 807,950
- -----------------------------------------------------------------------------------------------------------------------------
ELECTRONICS: INSTRUMENTATION-2.1% Hewlett-Packard Co. 25,500 2,014,500
- -----------------------------------------------------------------------------------------------------------------------------
OFFICE EQUIPMENT AND Minnesota Mining and Manufacturing Co. 25,000 2,718,750
SUPPLIES-6.2% ------------------------------------------------------------------------------------------
Pitney Bowes, Inc. 50,000 2,068,750
------------------------------------------------------------------------------------------
Xerox Corp. 13,500 1,206,562
----------
5,994,062
- -----------------------------------------------------------------------------------------------------------------------------
UTILITIES-7.3%
- -----------------------------------------------------------------------------------------------------------------------------
ELECTRIC COS.-3.7% Allegheny Power System, Inc. 11,000 291,500
------------------------------------------------------------------------------------------
Niagara Mohawk Power Corp. 46,000 931,500
------------------------------------------------------------------------------------------
NIPSCO Industries, Inc. 26,000 854,750
------------------------------------------------------------------------------------------
SCANA Corp. 16,500 820,875
------------------------------------------------------------------------------------------
Union Electric Co. 16,000 628,000
----------
3,526,625
NATURAL GAS-1.0% Consolidated Natural Gas Co. 20,500 963,500
- -----------------------------------------------------------------------------------------------------------------------------
TELEPHONE (NEW)-2.6% Ameritech Corp. 15,600 1,197,300
------------------------------------------------------------------------------------------
Bell Atlantic Corp. 7,600 448,400
------------------------------------------------------------------------------------------
Southern New England Telecommunications Corp. 24,500 885,063
----------
2,530,763
Total Common Stocks (Cost $69,387,905) 85,507,145
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $78,038,820) 98.6% 94,158,061
- -----------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 1.4 1,470,159
------- ----------
NET ASSETS 100.0% $95,628,220
------- ----------
------- ----------
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES December 31, 1993
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C>
ASSETS Investments, at value (cost $78,038,820)-see accompanying statement $94,158,061
------------------------------------------------------------------------------------------
Cash 1,516,373
------------------------------------------------------------------------------------------
Receivables:
Shares of beneficial interest sold 540,617
Dividends and interest 176,365
Investments sold 13,685
------------------------------------------------------------------------------------------
Other 9,052
-----------
Total assets 96,414,153
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
LIABILITIES Payables and other liabilities:
Investments purchased 403,474
Shares of beneficial interest redeemed 240,929
Distribution assistance-Note 4 57,283
Dividends and distributions 34,797
Deferred trustee fees-Note 5 8,765
Other 40,685
-----------
Total liabilities 785,933
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSETS $95,628,220
-----------
-----------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF Paid-in capital $79,551,976
NET ASSETS ------------------------------------------------------------------------------------------
Undistributed net investment income 225
------------------------------------------------------------------------------------------
Distributions in excess of net realized gain from investment transactions (43,222)
------------------------------------------------------------------------------------------
Net unrealized appreciation on investments-Note 3 16,119,241
-----------
Net assets $95,628,220
-----------
-----------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE Class A Shares:
PER SHARE Net asset value and redemption price per share (based on net assets
of $90,469,747 and 6,279,938 shares of beneficial interest outstanding) $14.41
Maximum offering price per share (net asset value
plus sales charge of 5.75% of offering price) $15.29
------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based
on net assetsof $5,158,473 and 359,470 shares of beneficial interest outstanding) $14.35
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENT OF OPERATIONS For the Year Ended December 31, 1993
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C>
INVESTMENT INCOME Dividends $2,301,756
------------------------------------------------------------------------------------------
Interest 324,670
----------
Total income 2,626,426
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
EXPENSES Management fees-Note 4 614,932
------------------------------------------------------------------------------------------
Distribution assistance:
Class A-Note 4 198,834
Class B-Note 4 16,056
------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees-Note 4 72,447
------------------------------------------------------------------------------------------
Shareholder reports 57,937
------------------------------------------------------------------------------------------
Legal and auditing fees 20,583
------------------------------------------------------------------------------------------
Custodian fees and expenses 20,266
------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 8,929
Class B 1,337
------------------------------------------------------------------------------------------
Trustees' fees and expenses 7,731
------------------------------------------------------------------------------------------
Other 9,117
----------
Total expenses 1,028,169
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 1,598,257
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED Net realized gain on investments 4,772,844
------------------------------------------------------------------------------------------
GAIN (LOSS) ON INVESTMENTS Net change in unrealized appreciation on investments (52,118)
----------
Net realized and unrealized gain on investments 4,720,726
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $6,318,983
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1992
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
OPERATIONS Net investment income $ 1,598,257 $ 1,250,163
------------------------------------------------------------------------------------------
Net realized gain on investments 4,772,844 1,430,983
------------------------------------------------------------------------------------------
Net change in unrealized appreciation or
depreciation on investments (52,118) 2,336,062
----------- -----------
Net increase in net assets resulting from
operations 6,318,983 5,017,208
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND Dividends from net investment income:
DISTRIBUTIONS TO Class A ($.288 and $.322 per share, respectively) (1,573,023) (1,252,511)
SHAREHOLDERS Class B ($.166 per share) (33,142) --
------------------------------------------------------------------------------------------
Distributions from net realized gain on investments:
Class A ($.76 and $.346 per share, respectively) (4,515,011) (1,431,916)
Class B ($.76 per share) (258,413) --
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST Net increase in net assets resulting from
TRANSACTIONS Class A beneficial interest transactions-Note 2 30,973,434 7,662,567
------------------------------------------------------------------------------------------
Net increase in net assets resulting from
Class B beneficial interest transactions-Note 2 5,339,170 --
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSETS Total increase 36,251,998 9,995,348
------------------------------------------------------------------------------------------
Beginning of year 59,376,222 49,380,874
----------- -----------
End of year (including undistributed net
investment income of $225 and $8,133, respectively) $95,628,220 $59,376,222
----------- -----------
----------- -----------
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------------------------------------------------------------------- ------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1993 1992 1991(3) 1990 1989 1988 1987 1986(2) 1993(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of
period
- ------------------------------------------------------------------------------------------------------------------------------------
$14.19 $13.57 $11.39 $12.08 $10.47 $ 9.51 $9.98 $10.16 $14.60
Income (loss) from investment
operations:
Net investment income .29 .32 .33 .37 .40 .33 .34 .01 .17
Net realized and unrealized
gain (loss) on investments .98 .97 2.49 (.57) 1.87 1.15 (.22) (.19) .51
------- ------ ------ ------ ------ ------ ------ ------ ---------
Total income (loss) from
investment operations 1.27 1.29 2.82 (.20) 2.27 1.48 .12 (.18) .68
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net
investment income (.29) (.32) (.33) (.39) (.41) (.33) (.41) -- (.17)
Distributions from net realized
gain on investments (.76) (.35) (.31) (.10) (.25) (.19) (.18) -- (.76)
------- ------ ------ ------ ------ ------ ------ ------ ---------
Total dividends and distributions
to shareholders (1.05) (.67) (.64) (.49) (.66) (.52) (.59) -- (.93)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.41 $14.19 $13.57 $11.39 $12.08 $10.47 $9.51 $ 9.98 $14.35
------- ------ ------ ------ ------ ------ ------ ------ ---------
------- ------ ------ ------ ------ ------ ------ ------ ---------
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(4) 8.97% 9.61% 25.23% (1.53)% 21.93% 15.61% 1.10% (1.77)% 4.63%
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $90,470 $59,376 $49,381 $40,153 $37,713 $27,434 $19,377 $20,162 $5,158
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $80,229 $53,485 $45,581 $39,104 $33,742 $24,658 $22,322 (2) $2,527
- ------------------------------------------------------------------------------------------------------------------------------------
Number of shares outstanding at
end of period (in thousands) 6,280 4,184 3,639 3,526 3,122 2,620 2,039 2,021 359
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 1.97% 2.34% 2.59% 3.22% 3.51% 3.45% 3.15% (2) .97%(5)
Expenses, before voluntary
reimbursement 1.24% 1.19% 1.31% 1.36% 1.40% 1.21% .70% (2) 2.14%(5)
Expenses, net of voluntary
reimbursement N/A N/A 1.26% 1.30% 1.30% 1.19% N/A (2) N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 24.3% 12.3% 14.5% 13.5% 14.9% 13.1% 10.8% (2) 24.3%
<FN>
1. For the period from May 1, 1993 (inception of offering) to December 31, 1993.
2. For the period from December 22, 1986 to December 31, 1986. Ratios during
this development period would not be indicative of representative results.
3. On March 28, 1991, Oppenheimer Management Corporation became the investment
advisor to the Fund.
4. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period, with all dividends and distributions reinvested
in additional shares on the reinvestment date, and redemption at the net asset
value calculated on the last business day of the fiscal period. Sales charges
are not reflected in the total returns.
5. Annualized.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the year
ended December 31, 1993 were $25,469,747 and $17,554,755, respectively.
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. SIGNIFICANT Oppenheimer Value Stock Fund (the Fund) is a separate
ACCOUNTING POLICIES fund of Oppenheimer Integrity Funds, a diversified,
open-end management investment company registered
under the Investment Company Act of 1940, as amended.
The Fund's investment advisor is Oppenheimer
Management Corporation (the Manager). The Fund offers
both Class A and Class B shares. Class A shares are
sold with a front-end sales charge. Class B shares may
be subject to a contingent deferred sales charge. Both
classes of shares have identical rights to earnings,
assets and voting privileges, except that each class
has its own distribution plan, expenses directly
attributable to a particular class and exclusive
voting rights with respect to matters affecting a
single class. Class B shares will automatically
convert to Class A shares six years after the date of
purchase. The following is a summary of significant
accounting policies consistently followed by the Fund.
-----------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued
at 4:00 p.m. (New York time) on each trading day.
Listed and unlisted securities for which such
information is regularly reported are valued at the
last sale price of the day or, in the absence of
sales, at values based on the closing bid or asked
price or the last sale price on the prior trading day.
Short-term debt securities having a remaining maturity
of 60 days or less are valued at cost (or last
determined market value) adjusted for amortization to
maturity of any premium or discount. Securities for
which market quotes are not readily available are
valued under procedures established by the Board of
Trustees to determine fair value in good faith.
-----------------------------------------------------
ALLOCATION OF INCOME, EXPENSES AND GAINS AND LOSSES.
Income, expenses (other than those attributable to a
specific class) and gains and losses are allocated
daily to each class of shares based upon the relative
proportion of net assets represented by such class.
Operating expenses directly attributable to a specific
class are charged against the operations of that
class.
-----------------------------------------------------
FEDERAL INCOME TAXES. The Fund intends to continue to
comply with provisions of the Internal Revenue Code
applicable to regulated investment companies and to
distribute all of its taxable income, including any
net realized gain on investments not offset by loss
carryovers, to shareholders. Therefore, no federal
income tax provision is required.
-----------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. Dividends and
distributions to shareholders are recorded on the
ex-dividend date.
-----------------------------------------------------
OTHER. Investment transactions are accounted for on
the date the investments are purchased or sold (trade
date) and dividend income is recorded on the
ex-dividend date. Realized gains and losses on
investments and unrealized appreciation and
depreciation are determined on an identified cost
basis, which is the same basis used for federal income
tax purposes.
- -------------------------------------------------------------------------------
2. SHARES OF The Fund has authorized an unlimited number of no par
BENEFICIAL INTEREST value shares of beneficial interest of each class.
Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993(1) YEAR ENDED DECEMBER 31, 1992
------------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 2,167,501 $19,481,793 741,739 $10,397,819
Issued in connection with
the acquisition of Oppenheimer
Blue Chip Fund-Note 6 1,356,899 20,149,959 -- --
Dividends and distributions reinvested 379,876 5,528,826 58,050 817,191
Redeemed (1,808,202) (14,187,144) (254,477) (3,552,443)
--------- ----------- ------- -----------
Net increase 2,096,074 $30,973,434 545,312 $ 7,662,567
--------- ----------- ------- -----------
--------- ----------- ------- -----------
----------------------------------------------------------------------------------------------------------
Class B:
Sold 357,108 $ 5,313,077 -- $ --
Dividends and distributions reinvested 18,763 270,609 -- --
Redeemed (16,401) (244,516) -- --
Net increase 359,470 $ 5,339,170 -- $ --
<FN>
1. For the year ended December 31, 1993 for Class A
shares and for the period from May 1, 1993 (inception
of offering) to December 31, 1993 for Class B shares.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
- -------------------------------------------------------------------------------
3. UNREALIZED GAINS AND At December 31, 1993, net unrealized appreciation of
LOSSES ON INVESTMENTS investments of $16,119,241 was composed of gross
appreciation of $18,112,985, and gross depreciation of
$1,993,744.
4. MANAGEMENT FEES Management fees paid to the Manager were in accordance
AND OTHER with the investment advisory agreement with the Fund
TRANSACTIONS WITH which provides for an annual fee of .75% on the first
AFFILIATES $100 million of net assets with a reduction of .03%
on each $200 million thereafter, to .66% on net assets
in excess of $500 million. The Manager has agreed to
reimburse the Fund if aggregate expenses (with
specified exceptions) exceed the most stringent
applicable regulatory limit on Fund expenses.
For the year ended December 31, 1993,
commissions (sales charges paid by investors) on sales
of Class A shares totaled $296,555, of which $232,226
was retained by Oppenheimer Funds Distributor, Inc.
(OFDI), a subsidiary of the Manager, as general
distributor, and by an affiliated broker/dealer. During
the year ended December 31, 1993, OFDI received
contingent deferred sales charges of $58 upon
redemption of Class B shares.
Oppenheimer Shareholder Services (OSS), a
division of the Manager, is the transfer and
shareholder servicing agent for the Fund, and for other
registered investment companies. OSS's total costs of
providing such services are allocated ratably to these
companies.
Under separate approved plans of
distribution, each class may expend up to .25% of its
net assets annually to reimburse OFDI for costs
incurred in distributing shares of the Fund, including
amounts paid to brokers, dealers, banks and other
institutions. In addition, Class B shares are subject
to an asset-based sales charge of .75% of net assets
annually, to reimburse OFDI for sales commissions paid
from its own resources at the time of sale and
associated financing costs. In the event of termination
or discontinuance of the Class B plan of distribution,
the Fund would be contractually obligated to pay OFDI
for any expenses not previously reimbursed or recovered
through contingent deferred sales charges. During the
year ended December 31, 1993, OFDI paid $149,525 to an
affiliated broker/dealer as reimbursement for Class A
distribution-related expenses and retained $16,056 as
reimbursement for Class B distribution-related expenses
and sales commissions.
- -------------------------------------------------------------------------------
5. DEFERRED TRUSTEE A former trustee elected to defer receipt of fees
COMPENSATION earned. These deferred fees earn interest at a rate
determined by the current Board of Trustees at the
beginning of each calendar year, compounded each
quarter-end. As of December 31, 1993, the Fund was
incurring interest at a rate of 6.01% per annum.
Deferred fees are payable in annual installments, with
accrued interest, each April 1 through 1995.
- -------------------------------------------------------------------------------
6. ACQUISITION OF On March 26, 1993, the Fund acquired all of the net
OPPENHEIMER assets of Oppenheimer Blue Chip Fund (Blue Chip),
BLUE CHIP FUND pursuant to an Agreement and Plan of Reorganization
approved by the Blue Chip shareholders on January 28,
1993. The Fund issued 1,356,899 shares of beneficial
interest, valued at $20,149,959, in exchange for the
net assets, resulting in combined net assets of
$83,976,756 on March 26, 1993. The net assets acquired
included net unrealized appreciation of $2,523,063. The
exchange was tax-free.
<PAGE>
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Sub-Adviser
Concert Capital Management, Inc.
125 High Street
Boston, Massachusetts 02110
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche
1560 Broadway
Denver, Colorado 80202
Legal Counsel
Myer, Swanson & Adams, P.C.
1600 Broadway
Denver, Colorado 80202-4918
<PAGE>
OPPENHEIMER INTEGRITY FUNDS
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
1. Financial Highlights (See Parts A and B, Prospectus and
Statement of Additional Information): Filed herewith.
2. Independent Auditors' Reports (See Part B, Statement
of Additional Information): Filed herewith.
3. Statements of Investments (See Part B, Statement
of Additional Information): Filed herewith.
4. Statements of Assets and Liabilities (See Part B,
Statement of Additional Information): Filed herewith.
5. Statements of Operations (See Part B, Statement of
Additional Information): Filed herewith.
6. Statements of Changes in Net Assets (See Part B,
Statement of Additional Information): Filed herewith.
7. Notes to Financial Statements (See Part B, Statement of
Additional Information): Filed herewith.
8. Independent Auditors' Consent: Filed herewith.
(b) Exhibits:
1. Amended and Restated Declaration of Trust dated
April 30, 1993: Filed with Registrant's Post-Effective
Amendment No. 18, 4/30/93, and incorporated herein
by reference.
2. Registrant's By-Laws dated 6/25/91: Filed with
Registrant's Post-Effective Amendment No. 16, 5/1/92, and
incorporated herewith by reference.
3. Not applicable.
4. (i) Specimen Class A Share Certificate for Oppenheimer
Value Stock Fund: Filed herewith.
(ii) Specimen Class A Share Certificate for Oppenheimer
Investment Grade Bond Fund: Filed herewith.
(iii) Specimen Class B Share Certificate for Oppenheimer
Value Stock Fund: Filed herewith.
(iv) Specimen Class B Share Certificate for Oppenheimer
Investment Grade Bond Fund: Filed herewith.
5. (i) Investment Advisory Agreement dated 3/28/91 for
Oppenheimer Investment Grade Bond Fund: Filed
as Exhibit 5(i) of Registrant's Post-Effective
Amendment No. 15, 3/29/91, and incorporated
herein by reference.
(ii) Investment Advisory Agreement dated 3/28/91 for
Oppenheimer Value Stock Fund: Filed with
Registrant's Post-Effective Amendment No. 16,
5/1/92, and incorporated herein by reference.
(iii) Investment Sub-Advisory Agreement dated 3/28/91 for
Oppenheimer Investment Grade Bond Fund: Filed as
Exhibit 5(iii) of Registrant's Post-Effective
Amendment No. 15, 3/29/91, and incorporated herein
by reference.
(iv) Investment Sub-Advisory Agreement dated 4/23/93 for
Oppenheimer Value Stock Fund - Filed with Registrant's
Post-Effective Amendment No. 18, 4/30/93, and
incorporated herein by reference.
(v) Letter dated 12/16/92 concerning temporary delegation
of duties to manage Oppenheimer Value Stock Fund -
Filed with Registrant's Post-Effective Amendment
No. 18, 4/30/93, and incorporated herein by reference.
(vi) Unconditional Guarantee Agreement dated 1/1/93 by
Massachusetts Mutual Life Insurance Company to
Oppenheimer Value Stock Fund of Concert Capital
Management, Inc.'s performance - Filed with
Registrant's Post-Effective Amendment No. 18,
4/30/93, and incorporated herein by reference.
6. (i) General Distributor's Agreement dated
10/13/92: Filed with Registrant's Post-Effective
Amendment No. 17, 2/26/93, and incorporated
herein by reference.
(ii) Form of Oppenheimer Fund Management, Inc. Dealer Agreement:
Filed with Post-Effective Amendment No. 12 to the
Registration Statement of Oppenheimer Government Securities
Fund (Reg. No. 33-02769), 12/2/92, and incorporated herein
by reference.
(iii) Form of Oppenheimer Fund Management, Inc. Broker Agreement:
Filed with Post-Effective Amendment No. 12 to the
Registration Statement of Oppenheimer Government Securities
Fund (Reg. No. 33-02769), 12/2/92, and incorporated herein
by reference.
(iv) Form of Oppenheimer Fund Management, Inc. Agency Agreement:
Filed with Post-Effective Amendment No. 12 to the Registration
Statement of Oppenheimer Government Securities Fund
(Reg. No. 33-02769), 12/2/92, and incorporated
herein by reference.
(v) Broker Agreement between Oppenheimer Fund Management, Inc.
and Newbridge Securities, Inc. dated 10/1/86: Filed as
Exhibit 6 of Post-Effective Amendment No. 25 of Oppenheimer
Special Fund (Reg. No. 2-45272), 11/1/86, and incorporated
herein by reference.
7. Not applicable.
8. Custody Agreement dated 11/12/92, between the Registrant and
The Bank of New York: Filed with Registrant's Post-Effective
Amendment No. 17, 2/26/93, and incorporated herein by reference.
9. Agreement and Plan of Reorganization dated 8/25/92 between
Oppenheimer Value Stock Fund and Oppenheimer Blue Chip Fund:
Filed herewith.
10. Opinion and Consent of Counsel dated 2/11/91: Incorporated
herein by reference to Registrant's Rule 24f-2 Notice filed on
2/19/91.
11. Not applicable.
12. Not applicable.
13. Not applicable.
14. (i) Form of Individual Retirement Account Trust Agreement:
Filed as Exhibit 14 of Post-Effective Amendment No. 21 of
Oppenheimer U.S. Government Trust (Reg. No. 2-76645),
8/25/93, and incorporated herein by reference.
(ii) Form of prototype Standardized and Non-Standardized
Profit-Sharing Plan and Money Purchase Pension Plan for
self-employed persons and corporations: Filed with
Post-Effective Amendment No. 3 of Oppenheimer Global
Growth & Income Fund (File No. 33-33799), 1/31/92,
and incorporated herein by reference.
(iii) Form of Tax-Sheltered Retirement Plan and Custody
Agreement for employees of public schools and tax-exempt
organizations: Filed as Exhibit 14 of Post-Effective
Amendment No. 22 of Oppenheimer Directors Fund (File No.
2-62240), 2/1/90, and incorporated herein by reference.
(iv) Form of Simplified Employee Pension IRA: Filed as an
Exhibit to Post-Effective Amendment No. 36 of Oppenheimer
Equity Income Fund (Reg. No. 2-33043), 10/23/91, and
incorporated herein by reference.
(v) Form of SAR-SEP Simplified Employee Pension IRA:
Filed with Registrant's Post-Effective Amendment No. 20,
3/1/94, and incorporated herein by reference.
15. (i) Service Plan and Agreement under Rule 12b-1 of the
Investment Company Act of 1940 for Class A shares of
Oppenheimer Investment Grade Bond Fund dated 6/22/93:
Filed with Registrant's Post-Effective Amendment No. 20,
3/1/94, and incorporated herein by reference.
(ii) Service Plan and Agreement under Rule 12b-1 of the
Investment Company Act of 1940 for Class A shares of
Oppenheimer Value Stock Fund dated 6/22/93:
Filed with Registrant's Post-Effective Amendment
No. 20, 3/1/94, and incorporated herein by reference.
(iii) Distribution and Service Plan and Agreement under
Rule 12b-1 of the Investment Company Act of 1940 for
Class B shares of Oppenheimer Investment Grade Bond
Fund dated 6/22/93: Filed with Registrant's
Post-Effective Amendment No. 20, 3/1/94, and
incorporated herein by reference.
(iv) Distribution and Service Plan and Agreement under Rule
12b-1 of the Investment Company Act of 1940 for Class B
shares of Oppenheimer Value Stock Fund dated 6/22/93:
Filed with Registrant's Post-Effective Amendment No. 20,
3/1/94, and incorporated herein by reference.
16. (i) Performance Computation Schedule for Oppenheimer
Value Stock Fund: Filed herewith.
(ii) Performance Computation Schedule for Oppenheimer
Investment Grade Bond Fund: Filed herewith.
-- Powers of Attorney and Certified Board Resolution:
Filed with Registrant's Post-Effective Amendment No. 20,
3/1/94, and incorporated herein by reference.
Item 25. Persons Controlled by or Under Common Control with Registrant
-------------------------------------------------------------
None
Item 26. Number of Holders of Securities
-------------------------------
Number of Record Holders
Title of Class as of March 29, 1994
-------------- ------------------------
Oppenheimer Investment Grade Bond Fund
Class A Shares of Beneficial Interest 9,769
Class B Shares of Beneficial Interest 184
Oppenheimer Value Stock Fund
Class A Shares of Beneficial Interest 5,550
Class B Shares of Beneficial Interest 807
Item 27. Indemnification
---------------
Article IV of Registrant's Declaration of Trust generally
provides, among other things, for the indemnification of Registrant's
Trustees and officers in a manner consistent with Securities and
Exchange Commission Release No. IC-11330.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of Registrant pursuant to the foregoing provisions
or otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by Registrant of expenses incurred or paid by a trustee, officer or
controlling person of Registrant in the successful defense of any action,
suit or proceeding) is asserted by such trustee, officer or controlling
person, Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act of
1933 and will be governed by the final adjudication of such issue.
Item 28. (a) Business and Other Connections of Investment Adviser
and Sub-Advisers
----------------------------------------------------
(i) Oppenheimer Management Corporation ("Oppenheimer") is the
investment adviser of the Registrant; it and certain subsidiaries and
its affiliates act in the same capacity to other registered investment
companies as described in Parts A and B hereto.
(ii) Massachusetts Mutual Life Insurance Company ("MassMutual") and
Concert Capital Management, Inc. ("Concert Capital"), an indirect wholly
owned management subsidiary of MassMutual, are the investment sub-advisers
of the Registrant's two series, Oppenheimer Investment Grade Bond Fund and
Oppenheimer Value Stock Fund, respectively. MassMutual offers life, health,
disability and accumulation products in the personal, business and estate
insurance markets. MassMutual and Concert Capital also act as investment
advisors to other registered investment companies, a real estate investment
trust, certain of MassMutual's insurance company subsidiaries and various
employee benefit plans.
(b) Business and Other Connections of Officers and Directors of
Investment Adviser and Sub-Adviser
-----------------------------------------------------------
For information as to the business, profession, vocation or employment of
a substantial nature of each of the officers and directors of Oppenheimer,
MassMutual and Concert Capital, reference is made to Part B of this
Registration Statement and to the registrations on Form ADV of Oppenheimer,
MassMutual and Concert Capital, filed under the Investment Advisers Act of
1940, which are incorporated herein by reference.
Item 29.Principal Underwriter
(a) Oppenheimer Funds Distributor, Inc. is the Distributor of the
Fund's shares. It is also the Distributor of each of the other registered
open-end investment companies for which Oppenheimer Management Corporation
is the investment adviser, as described in Parts A and B hereof.
(b) The information contained in the registration on Form BD of
Oppenheimer Funds Distributor, Inc., filed under the Securities Exchange
Act of 1934, is incorporated herein by reference.
(c) Not applicable.
Item 30. Location of Accounts and Records
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of
1940 and rules promulgated thereunder are in the possession of both
Oppenheimer Management Corporation at its offices at 3410 South Galena
Street, Denver, Colorado 80231 and MassMutual at its offices at 1295
State Street, Springfield, Massachusetts 01111.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant certifies that it meets
all of the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Denver and
State of Colorado on the 28th day of April, 1994.
OPPENHEIMER INTEGRITY FUNDS
/s/ James C. Swain *
by: --------------------------
James C. Swain, Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated:
Signatures: Title Date
- ----------- ----------------- ------------
/s/ James C. Swain* Chairman of the Board April 28, 1994
- ----------------------- of Trustees and
James C. Swain Principal Executive
Officer
/s/ Jon S. Fossel* President and Trustee April 28, 1994
- ----------------------
Jon S. Fossel
/s/ George Bowen* Treasurer and April 28, 1994
- ---------------------- Principal Financial
George Bowen and Accounting Officer
/s/ Robert G. Avis* Trustee April 28, 1994
- ----------------------
Robert G. Avis
/s/ William A. Baker* Trustee April 28, 1994
- ----------------------
William A. Baker
/s/ Charles Conrad, Jr.* Trustee April 28, 1994
- ----------------------
Charles Conrad, Jr.
/s/ Raymond J. Kalinowski* Trustee April 28, 1994
- ----------------------
Raymond J. Kalinowski
/s/ C. Howard Kast* Trustee April 28, 1994
- ----------------------
C. Howard Kast
/s/ Robert M. Kirchner* Trustee April 28, 1994
- ----------------------
Robert M. Kirchner
/s/ Ned M. Steel* Trustee April 28, 1994
- ---------------------------
Ned M. Steel
*By: /s/ Robert G. Zack
-------------------------------------
Robert G. Zack, Attorney-in-Fact
<PAGE>
OPPENHEIMER INTEGRITY FUNDS
EXHIBIT INDEX
Exhibit No. Document Description
- ----------- --------------------
24(a)(8) Independent Auditors' Consent
24(b)4(i) Specimen Share Certificate for
Class A Shares of Oppenheimer
Value Stock Fund
24(b)4(ii) Specimen Share Certificate for
Class A Shares of Oppenheimer
Investment Grade Bond
24(b)4(iii) Specimen Share Certificate for
Class B Shares of Oppenheimer
Value Stock Fund
24(b)4(iv) Specimen Share Certificate for
Class B Shares of Oppenheimer
Investment Grade Bond
24(b)9 Agreement and Plan of Reorganization
dated 8/25/92, between Oppenheimer
Value Stock Fund and Oppenheimer
Blue Chip Fund
24(b)16(i) Performance Computation Schedule
for Oppenheimer Value Stock Fund
24(b)16(ii) Performance Computation Schedule
for Oppenheimer Investment
Grade Bond Fund
Exhibit 24(a)(8)
INDEPENDENT AUDITORS' CONSENT
- -----------------------------
Oppenheimer Integrity Funds:
We hereby consent to the use in Post-Effective Amendment No. 20 to
Registration Statement No. 2-76547 of our report dated January 21, 1994
appearing in the Statement of Additional Information, which is a part of
such Registration Statement, and to the reference to us under the caption
"Condensed Financial Information" appearing in the Prospectus, which is
also a part of such Registration Statement.
DELOITTE & TOUCHE
Denver, Colorado
April 28, 1994
OPPENHEIMER INTEGRITY FUNDS
Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner, box with heading: NUMBER [of shares]
(upper right corner) share certificate no.
(upper right box with heading: CLASS A SHARES
below cert. no.)
(centered
below boxes) OPPENHEIMER INTEGRITY FUNDS
A MASSACHUSETTS BUSINESS TRUST
SERIES: OPPENHEIMER VALUE STOCK FUND
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 683947 10 5
(at left) is the owner of
(centered) FULLY PAID CLASS A SHARES OF BENEFICIAL INTEREST OF
OPPENHEIMER VALUE STOCK FUND
a series of OPPENHEIMER INTEGRITY FUNDS (hereinafter
called the "Trust"), transferable only on the books of the
Trust by the holder hereof in person or by duly authorized
attorney, upon surrender of this certificate properly
endorsed. This certificate and the shares represented
hereby are issued and shall be held subject to all of the
provisions of the Trust's Declaration of Trust to all of
which the holder by acceptance hereof assents. This
certificate is not valid until countersigned by the
Transfer Agent.
WITNESS the facsimile seal of the Fund [Trust]
[Corporation] and the signatures of its duly authorized
officers.
(signature Dated: (signature
at left of seal) at right of seal)
_______________________ ___________________
SECRETARY PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
FUND, TRUST OR CORPORATION NAME
SEAL
1982
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMER SHAREHOLDER SERVICES
(A DIVISION OF OPPENHEIMER MANAGEMENT
CORPORATION)
Denver (COLO) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11"
dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out
in full according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as joint tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ___________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received ................ hereby sell(s), assign(s), and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
_______________________________________________________________________
(Please print or type name and address of assignee)
______________________________________________________
________________________________________________Class A Shares of
beneficial interest [capital stock] represented by the within Certificate,
and do hereby irrevocably constitute and appoint
___________________________ Attorney to transfer the said shares on the
books of the within named Fund with full power of substitution in the
premises.
Dated: ______________________
Signed: __________________________
___________________________________
(Both must sign if joint owners)
Signature(s) __________________________
guaranteed Name of Guarantor
by: _____________________________
Signature of Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
vertically to right correspond with the name(s) as written upon the
of above paragraph) face of the certificate in every particular
without alteration or enlargement or any change
whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Fund.
PLEASE NOTE: This document contains a watermark OppenheimerFunds
when viewed at an angle. It is invalid without this "four hands"
watermark: logotype
edgar\325CERTA
OPPENHEIMER INTEGRITY FUNDS
Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner, box with heading: NUMBER [of shares]
(upper right corner) share certificate no.
(upper right box with heading: CLASS A SHARES
below cert. no.)
(centered
below boxes) OPPENHEIMER INTEGRITY FUNDS
A MASSACHUSETTS BUSINESS TRUST
SERIES: OPPENHEIMER INVESTMENT GRADE BOND FUND
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 683946 10 7
(at left) is the owner of
(centered) FULLY PAID CLASS A SHARES OF BENEFICIAL INTEREST OF
OPPENHEIMER INVESTMENT GRADE BOND FUND
a series of OPPENHEIMER INTEGRITY FUNDS (hereinafter
called the "Trust"), transferable only on the books of the
Trust by the holder hereof in person or by duly authorized
attorney, upon surrender of this certificate properly
endorsed. This certificate and the shares represented
hereby are issued and shall be held subject to all of the
provisions of the Trust's Declaration of Trust to all of
which the holder by acceptance hereof assents. This
certificate is not valid until countersigned by the
Transfer Agent.
WITNESS the facsimile seal of the Fund [Trust]
[Corporation] and the signatures of its duly authorized
officers.
(signature Dated: (signature
at left of seal) at right of seal)
_______________________ ___________________
SECRETARY PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
FUND, TRUST OR CORPORATION NAME
SEAL
1982
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMER SHAREHOLDER SERVICES
(A DIVISION OF OPPENHEIMER MANAGEMENT
CORPORATION)
Denver (COLO) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11"
dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out
in full according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as joint tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ___________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received ................ hereby sell(s), assign(s), and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
_______________________________________________________________________
(Please print or type name and address of assignee)
______________________________________________________
________________________________________________Class A Shares of
beneficial interest [capital stock] represented by the within Certificate,
and do hereby irrevocably constitute and appoint
___________________________ Attorney to transfer the said shares on the
books of the within named Fund with full power of substitution in the
premises.
Dated: ______________________
Signed: __________________________
___________________________________
(Both must sign if joint owners)
Signature(s) __________________________
guaranteed Name of Guarantor
by: _____________________________
Signature of Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
vertically to right correspond with the name(s) as written upon the
of above paragraph) face of the certificate in every particular
without alteration or enlargement or any change
whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Fund.
PLEASE NOTE: This document contains a watermark OppenheimerFunds
when viewed at an angle. It is invalid without this "four hands"
watermark: logotype
edgar\285CERTA
OPPENHEIMER INTEGRITY FUNDS
Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner, box with heading: NUMBER [of shares]
(upper right corner) share certificate no.
(upper right box with heading: CLASS B SHARES
below cert. no.)
(centered
below boxes) OPPENHEIMER INTEGRITY FUNDS
A MASSACHUSETTS BUSINESS TRUST
SERIES: OPPENHEIMER VALUE STOCK FUND
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 683947 20 4
(at left) is the owner of
(centered) FULLY PAID CLASS B SHARES OF BENEFICIAL INTEREST OF
OPPENHEIMER VALUE STOCK FUND
a series of OPPENHEIMER INTEGRITY FUNDS (hereinafter
called the "Trust"), transferable only on the books of the
Trust by the holder hereof in person or by duly authorized
attorney, upon surrender of this certificate properly
endorsed. This certificate and the shares represented
hereby are issued and shall be held subject to all of the
provisions of the Trust's Declaration of Trust to all of
which the holder by acceptance hereof assents. This
certificate is not valid until countersigned by the
Transfer Agent.
WITNESS the facsimile seal of the Fund [Trust]
[Corporation] and the signatures of its duly authorized
officers.
(signature Dated: (signature
at left of seal) at right of seal)
_______________________ ___________________
SECRETARY PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
FUND, TRUST OR CORPORATION NAME
SEAL
1982
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMER SHAREHOLDER SERVICES
(A DIVISION OF OPPENHEIMER MANAGEMENT
CORPORATION)
Denver (COLO) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11"
dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out
in full according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as joint tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ___________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received ................ hereby sell(s), assign(s), and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
_______________________________________________________________________
(Please print or type name and address of assignee)
______________________________________________________
________________________________________________Class B Shares of
beneficial interest [capital stock] represented by the within Certificate,
and do hereby irrevocably constitute and appoint ________________________
Attorney to transfer the said shares on the books of the within named Fund
with full power of substitution in the premises.
Dated: ______________________
Signed: __________________________
___________________________________
(Both must sign if joint owners)
Signature(s) __________________________
guaranteed Name of Guarantor
by: _____________________________
Signature of Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
vertically to right correspond with the name(s) as written upon the
of above paragraph) face of the certificate in every particular
without alteration or enlargement or any change
whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Fund.
PLEASE NOTE: This document contains a watermark OppenheimerFunds
when viewed at an angle. It is invalid without this "four hands"
watermark: logotype
edgar\325CERTB
OPPENHEIMER INTEGRITY FUNDS
Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner, box with heading: NUMBER [of shares]
(upper right corner) share certificate no.
(upper right box with heading: CLASS B SHARES
below cert. no.)
(centered
below boxes) OPPENHEIMER INTEGRITY FUNDS
A MASSACHUSETTS BUSINESS TRUST
SERIES: OPPENHEIMER INVESTMENT GRADE BOND FUND
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP 683946 20 6
(at left) is the owner of
(centered) FULLY PAID CLASS B SHARES OF BENEFICIAL INTEREST OF
OPPENHEIMER INVESTMENT GRADE BOND FUND
a series of OPPENHEIMER INTEGRITY FUNDS (hereinafter
called the "Trust"), transferable only on the books of the
Trust by the holder hereof in person or by duly authorized
attorney, upon surrender of this certificate properly
endorsed. This certificate and the shares represented
hereby are issued and shall be held subject to all of the
provisions of the Trust's Declaration of Trust to all of
which the holder by acceptance hereof assents. This
certificate is not valid until countersigned by the
Transfer Agent.
WITNESS the facsimile seal of the Fund [Trust]
[Corporation] and the signatures of its duly authorized
officers.
(signature Dated: (signature
at left of seal) at right of seal)
_______________________ ___________________
SECRETARY PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
FUND, TRUST OR CORPORATION NAME
SEAL
1982
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMER SHAREHOLDER SERVICES
(A DIVISION OF OPPENHEIMER MANAGEMENT
CORPORATION)
Denver (COLO) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11"
dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out
in full according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as joint tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ___________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received ................ hereby sell(s), assign(s), and
transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
_______________________________________________________________________
(Please print or type name and address of assignee)
______________________________________________________
________________________________________________Class B Shares of
beneficial interest [capital stock] represented by the within Certificate,
and do hereby irrevocably constitute and appoint
___________________________ Attorney to transfer the said shares on the
books of the within named Fund with full power of substitution in the
premises.
Dated: ______________________
Signed: __________________________
___________________________________
(Both must sign if joint owners)
Signature(s) __________________________
guaranteed Name of Guarantor
by: _____________________________
Signature of Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
vertically to right correspond with the name(s) as written upon the
of above paragraph) face of the certificate in every particular
without alteration or enlargement or any change
whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Fund.
PLEASE NOTE: This document contains a watermark OppenheimerFunds
when viewed at an angle. It is invalid without this "four hands"
watermark: logotype
edgar\285CERTB
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated this 25th day of August,
1992, by and between Oppenheimer Blue Chip Fund (the "Fund"), a
Massachusetts business trust, and Oppenheimer Integrity Funds ("Integrity
Funds"), a Massachusetts business trust, regarding one of its series,
Oppenheimer Value Stock Fund ("Value Stock").
W I T N E S S E T H:
WHEREAS, the parties are each open-end investment companies of the
management type; and
WHEREAS, the parties hereto desire to provide for the reorganization
pursuant to Section 368(a)(1) of the Internal Revenue Code of 1986, as
amended (the "Code") of the Fund through the acquisition by Value Stock
of substantially all of the assets of the Fund in exchange for the shares
of beneficial interest ("shares") of Value Stock and the assumption by
Value Stock of certain liabilities of the Fund, which shares of Value
Stock are thereafter to be distributed by the Fund pro rata to its
shareholders in complete liquidation of the Fund and complete cancellation
of its shares;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto agree as follows:
1. The parties hereto hereby adopt a Plan of Reorganization pursuant
to Section 368(a)(1) of the Code as follows: The reorganization will be
comprised of the acquisition of substantially all of the properties and
assets of the Fund in exchange for shares of Value Stock and the
assumption by Value Stock of certain liabilities of the Fund, followed by
the distribution of such Value Stock shares to the shareholders of the
Fund in exchange for their shares of the Fund, all upon and subject to the
terms of the Agreement hereinafter set forth.
The share transfer books of the Fund will be permanently closed
at the close of business on the Valuation Date (as hereinafter defined)
and only redemption requests received in proper form on or prior to the
close of business on the Valuation Date shall be fulfilled by the Fund;
redemption requests received by the Fund after that date shall be treated
as requests for the redemption of the shares of Value Stock to be
distributed to the shareholder in question as provided in Section 5.
2. On the Closing Date (as hereinafter defined), all of the assets
of the Fund on that date, excluding a cash reserve (the "Cash Reserve")
to be retained by the Fund sufficient in its discretion for the payment
of the expenses of the Fund's dissolution and its liabilities, but not in
excess of the amount contemplated by Section 10E, shall be delivered as
provided in Section 8 to Value Stock, in exchange for and against delivery
to the Fund on the Closing Date of a number of shares of Value Stock
having an aggregate net asset value equal to the value of the assets of
the Fund so transferred and delivered.
3. The net asset value of shares of Value Stock and the value of the
assets of the Fund to be transferred shall in each case be determined as
of the close of business of the New York Stock Exchange on the Valuation
Date. The computation of the net asset value of the shares of Value Stock
and the Fund shall be done in the manner used by Value Stock and the Fund,
respectively, in the computation of such net asset value per share as set
forth in their respective prospectuses. The methods used by Value Stock
in such computation shall be applied to the valuation of the securities
of the Fund to be transferred to Value Stock.
The Fund shall declare and pay, immediately prior to the
Valuation Date, a dividend or dividends which, together with all previous
such dividends, shall have the effect of distributing to the Fund's
shareholders all of the Fund's investment company taxable income for
taxable years ending on or prior to the Closing Date (computed without
regard to any dividends paid) and all of its net capital gain, if any,
realized in taxable years ending on or prior to the Closing Date (after
reduction for any capital loss carry-forward).
4. The closing shall be at the office of Oppenheimer Management
Corporation (the "Agent"), Two World Trade Center, Suite 3400, New York,
New York 10048, at 4:00 P.M. New York time on January 29, 1993, or at such
other time or place as the parties may designate or as provided below (the
"Closing Date"). The business day preceding the Closing Date is herein
referred to as the "Valuation Date."
In the event that on the Valuation Date either party has,
pursuant to the Investment Company Act of 1940 (the "Act") or any rule,
regulation or order thereunder, suspended the redemption of its shares or
postponed payment therefor, the Closing Date shall be postponed until the
first business day after the date when both parties have ceased such
suspension or postponement; provided, however, that if such suspension
shall continue for a period of 60 days beyond the Valuation Date, then the
other party to this Agreement shall be permitted to terminate this
Agreement without liability to either party for such termination.
5. As soon as practicable after the closing, the Fund shall
distribute on a pro rata basis: to the shareholders of the Fund on the
Valuation Date the shares of Value Stock received by the Fund on the
Closing Date in exchange for the assets of the Fund in liquidation and
cancellation of the outstanding shares of the Fund; for the purpose of the
distribution by the Fund of such shares of Value Stock to its
shareholders, Value Stock will promptly cause the Agent to: (a) credit an
appropriate number of shares of Value Stock on the books of Value Stock
to each shareholder of the Fund in accordance with a list (the
"Shareholder List") of its shareholders received from the Fund; and (b)
confirm an appropriate number of shares of Value Stock to each shareholder
of the Fund; certificates for shares of Value Stock will be issued upon
written request of a former shareholder of the Fund but only for whole
shares with fractional shares credited to the name of the shareholder on
the books of Value Stock.
The Shareholder List shall indicate, as of the close of business
on the Valuation Date, the name and address of each shareholder of the
Fund, indicating his or her share balance. The Fund agrees to supply the
Shareholder List to Value Stock not later than the Closing Date.
Shareholders of the Fund holding certificates representing their shares
shall not be required to surrender their certificates to anyone in
connection with the reorganization. After the reorganization, however,
it will be necessary for such shareholders to surrender their certificates
in order to redeem the shares of Value Stock which they received.
6. Within one year after the closing, the Fund shall (a) either pay
or make provision for payment of all of its liabilities and taxes, and
(b) either (i) transfer any remaining amount of the Cash Reserve to Value
Stock, if such remaining amount (as reduced by the estimated cost of
distributing it to shareholders) is not material (as defined below) or
(ii) distribute such remaining amount to the shareholders of the Fund on
the Valuation Date. Such remaining amount shall be deemed to be material
if the amount to be distributed, after deduction of the estimated expenses
of the distribution, equals or exceeds one cent per share of the Fund
outstanding on the Valuation Date.
7. Prior to the Closing Date, there shall be coordination between
the parties as to their respective portfolios so that, after the closing,
Value Stock will be in compliance with all of its investment policies and
restrictions. At the closing, the Fund shall deliver to Value Stock two
copies of a list setting forth the securities then owned by the Fund and
the respective federal income tax bases thereof.
8. Portfolio securities or written evidence acceptable to Value
Stock of record ownership thereof by The Depository Trust Company or
through the Federal Reserve Book Entry System or any other depository
approved by the Fund pursuant to Rule 17f-4 under the Act shall be
delivered, or transferred by appropriate transfer or assignment documents,
by the Fund on the Closing Date to Value Stock, or at its direction, to
its custodian bank, duly endorsed in proper form for transfer in such
condition as to constitute good delivery thereof in accordance with the
custom of brokers and shall be accompanied by all necessary state transfer
stamps, if any, or a check for the appropriate purchase price thereof.
The cash delivered shall be in the form of certified or bank cashiers'
checks or by bank wire payable to the order of Value Stock for the account
of Value Stock. Shares of Value Stock representing the number of shares
of Value Stock being delivered against the securities and cash of the
Fund, registered in the name of the Fund, shall be transferred to the Fund
on the Closing Date. Such shares shall thereupon be assigned by the Fund
to its shareholders so that the shares of Value Stock may be distributed
as provided in Section 5.
If, at the Closing Date, the Fund is unable to make delivery
under this Section 8 to Value Stock of any of its portfolio securities or
cash for the reason that any of such securities purchased by the Fund, or
the cash proceeds of a sale of portfolio securities, prior to the Closing
Date have not yet been delivered to it or the Fund's custodian, then the
delivery requirements of this Section 8 with respect to said undelivered
securities or cash will be waived and the Fund will deliver to Value Stock
by or on the Closing Date and with respect to said undelivered securities
or cash executed copies of an agreement or agreements of assignment in a
form reasonably satisfactory to Value Stock, together with such other
documents, including a due bill or due bills and brokers' confirmation
slips as may reasonably be required by Value Stock.
9. Value Stock shall not assume the liabilities (except for
portfolio securities purchased which have not settled and for shareholder
redemption and dividend checks outstanding) of the Fund, but the Fund
will, nevertheless, use its best efforts to discharge all known
liabilities, so far as may be possible, prior to the Closing Date. The
cost of printing the proxies and proxy statements associated with this
reorganization will be paid by the Fund. The cost of mailing the proxies
and proxy statements, and the cost of the tax opinion will be split
between the Fund and Value Stock. Any documents such as existing
prospectuses or annual reports that are included in that mailing will be
a cost of the fund issuing the document. Any other out-of-pocket expenses
of the Fund associated with this reorganization, including legal,
accounting and transfer agent expenses, will be borne by the Fund and
Value Stock, respectively.
10. The obligations of Value Stock hereunder shall be subject to
the following conditions:
A. The Board of Trustees of the Fund shall have authorized the
execution of this Agreement, and the shareholders of the Fund shall have
approved the Agreement and the transactions contemplated herein, and the
Fund shall have furnished to Value Stock copies of resolutions to that
effect certified by the Secretary or an Assistant Secretary of the Fund;
such shareholder approval shall have been by the vote of the holders of
a majority as defined in the Act of the outstanding voting securities of
the Fund at a meeting for which proxies have been solicited by the Proxy
Statement and Prospectus.
B. Value Stock shall have received an opinion dated the
Closing Date of counsel to the Fund, to the effect that (i) the Fund is
a business trust duly organized, validly existing and in good standing
under the laws of the Commonwealth of Massachusetts with full corporate
powers to carry on its business as then being conducted and to enter into
and perform this Agreement; and (ii) that all corporate action necessary
to make this Agreement, according to its terms, valid, binding and
enforceable on the Fund and to authorize effectively the transactions
contemplated by this Agreement have been taken by the Fund.
C. The representations and warranties of the Fund contained
herein shall be true and correct at and as of the Closing Date, and Value
Stock shall have been furnished with a certificate of the President, or
the Vice President, or the Secretary or the Assistant Secretary or the
Treasurer of the Fund, dated the Closing Date, to that effect.
D. On the Closing Date, the Fund shall have furnished to Value
Stock a certificate of the Treasurer or Assistant Treasurer of the Fund
as to the amount of the capital loss carry-over and net unrealized
appreciation or depreciation, if any, with respect to the Fund as of the
Closing Date.
E. The Cash Reserve shall not exceed 10% of the value of the
net assets, nor 30% in value of the gross assets, of the Fund at the close
of business on the Valuation Date.
F. A Registration Statement filed by Integrity Funds under the
Securities Act of 1933 on Form N-14 and containing a preliminary form of
the Proxy Statement and Prospectus, shall have become effective under that
Act not later than June 30, 1992.
G. On the Closing Date, Value Stock shall have received a
letter of Robert G. Galli, attorney-at-law, or Andrew J. Donohue,
attorney-at-law, or other counsel acceptable to Value Stock, stating that
nothing has come to his attention which in his judgment would indicate
that as of the Closing Date there were any material actual or contingent
liabilities of the Fund arising out of litigation brought against the Fund
or claims asserted against it, or pending or to the best of his knowledge
threatened litigation not reflected in or apparent by the most recent
audited financial statements and footnotes thereto of the Fund delivered
to Value Stock. Such letter may also include such additional statements
relating to the scope of the review conducted by such counsel and his
responsibilities and liabilities as are not unreasonable under the
circumstances.
H. Value Stock shall have received an opinion, dated the
Closing Date, of Deloitte & Touche, to the same effect as the opinion
contemplated by Section 11.E. of this Agreement.
I. Value Stock shall have received at the closing all of the
assets of the Fund to be conveyed hereunder, which assets shall be free
and clear of all liens, encumbrances, security interests, restrictions and
limitations whatsoever.
J. Value Stock and the Fund shall have been granted an
Exemptive Order pursuant to Section 17(b) of the Act from the "joint
transaction" prohibition of Section 17(a) of the Act, and shall also have
received a clearance letter from the Federal Trade Commission regarding
their Hart-Scott-Rodino pre-merger filing (16 CFR 801) under the Hart-
Scott-Rodino Anti-Trust Improvements Act of 1976 (15 U.S.C.A. Paragraph 18A).
11. The obligations of the Fund hereunder shall be subject to the
following conditions:
A. The Board of Trustees of Integrity Funds shall have
authorized the execution of this Agreement, and the transactions
contemplated hereby, and Integrity Funds shall have furnished to the Fund
copies of resolutions to that effect certified by the Secretary or an
Assistant Secretary of Integrity Funds.
B. The Fund's shareholders shall have approved this Agreement
and the transactions contemplated hereby, by an affirmative vote of the
holders of a majority as defined in the Act of the outstanding voting
securities of the Fund, and the Fund shall have furnished Value Stock
copies of resolutions to that effect certified by the Secretary or an
Assistant Secretary of the Fund.
C. The Fund shall have received an opinion dated the Closing
Date of counsel to Integrity Funds, to the effect that (i) Integrity Funds
is a validly existing Massachusetts business trust with full power to
carry on its business as then being conducted and to enter into and
perform this Agreement; (ii) all action necessary to make this Agreement,
according to its terms, valid, binding and enforceable upon Integrity
Funds and to authorize effectively the transactions contemplated thereby
have been taken by Integrity Funds, and (iii) the shares of Value Stock
to be issued hereunder are duly authorized and when issued will be validly
issued, fully-paid and non-assessable except as set forth in Value Stock's
Prospectus and Statement of Additional Information.
D. The representations and warranties of Integrity Funds on
behalf of Value Stock contained herein shall be true and correct at and
as of the Closing Date, and the Fund shall have been furnished with a
certificate of the President or the Secretary or the Treasurer of
Integrity Funds to that effect dated the Closing Date.
E. The Fund shall have received an opinion of Deloitte &
Touche to the effect that the Federal tax consequences of the transaction,
if carried out in the manner outlined in this Plan of Reorganization and
in accordance with (i) the Fund's representation that there is no plan or
intention by any Fund shareholder who owns 5% or more of the Fund's
outstanding shares, and, to the Fund's best knowledge, there is no plan
or intention on the part of the remaining Fund shareholders, to redeem,
sell, exchange or otherwise dispose of a number of Value Stock shares
received in the transaction that would reduce the Fund shareholders'
ownership of Value Stock shares to a number of shares having a value, as
of the Closing Date, of less than 50% of the value of all of the formerly
outstanding Fund shares as of the same date, and (ii) the representation
by each of the Fund and Integrity Funds that, as of the Closing Date, the
Fund and Integrity Funds will qualify as regulated investment companies
or will meet the diversification test of Section 368(a)(2)(F)(ii) of the
Code; will be as follows:
1. The transactions contemplated by the Reorganization
Plan will qualify as a tax-free "reorganization"
within the meaning of Section 368(a)(1) of the
Internal Revenue Code of 1986, as amended, and under
the regulations promulgated thereunder.
2. The Fund and Integrity Funds on behalf of Value Stock
will each qualify as a "party to a reorganization"
within the meaning of Section 368(b)(2).
3. No gain or loss will be recognized by the
shareholders of the Fund upon the distribution of
shares of beneficial interest in Value Stock to the
shareholders of the Fund pursuant to Section 354.
4. Under Section 361(a) no gain or loss will be
recognized by the Fund by reason of the transfer of
its assets solely in exchange for shares of Value
Stock.
5. Under Section 1032 no gain or loss will be recognized
by Value Stock by reason of the transfer of the
Fund's assets solely in exchange for shares of Value
Stock.
6. The shareholders of the Fund will have the same tax
basis and holding period for the shares of beneficial
interest in Value Stock that they receive as they had
for the Fund shares that they previously held,
pursuant to Sections 358(a) and 1223(1),
respectively.
7. The securities transferred by the Fund to Value Stock
will have the same tax basis and holding period in
the hands of Value Stock as they had for the Fund,
pursuant to Sections 362(b) and 1223(1),
respectively.
F. The Cash Reserve shall not exceed 10% of the value of the
net assets, nor 30% in value of the gross assets, of the Fund at the close
of business on the Valuation Date.
G. A Registration Statement filed by Integrity Funds under the
Securities Act of 1933 on Form N-14, containing a preliminary form of the
Proxy Statement and Prospectus, shall have become effective under that Act
not later than June 30, 1993.
H. On the Closing Date, the Fund shall have received a letter
of Robert G. Galli, attorney-at-law, or Andrew J. Donohue, attorney-at-
law, or other counsel acceptable to the Fund, stating that nothing has
come to his attention which in his judgment would indicate that as of the
Closing Date there were any material actual or contingent liabilities of
Value Stock arising out of litigation brought against Value Stock or
claims asserted against it, or pending or, to the best of his knowledge,
threatened litigation not reflected in or apparent by the most recent
audited financial statements and footnotes thereto of Value Stock
delivered to the Fund. Such letter may also include such additional
statements relating to the scope of the review conducted by such counsel
and his responsibilities and liabilities as are not unreasonable under the
circumstances.
I. The Fund shall acknowledge receipt of the shares of Value
Stock.
J. Value Stock and the Fund shall have been granted an
Exemptive Order pursuant to Section 17(b) of the Act from the "joint
transaction" prohibition of Section 17(a) of the Act, and shall also have
received a clearance letter from the Federal Trade Commission regarding
their Hart-Scott Rodino pre-merger filing (16 CFR 801) under the Hart-
Scott-Rodino Anti-Trust Improvements Act of 1976 (15 U.S.C.A. Paragraph 18A).
12. The Fund hereby represents and warrants that:
(a) The financial statements of the Fund as at September 30,
1991 (audited) and March 31, 1992 (unaudited) heretofore furnished to
Value Stock, present fairly the financial position, results of operations,
and changes in net assets of the Fund as of that date, in conformity with
generally accepted accounting principles applied on a basis consistent
with the preceding year; and that from September 30, 1991 through the date
hereof there have not been, and through the Closing Date there will not
be, any material adverse change in the business or financial condition of
the Fund, it being agreed that a decrease in the size of the Fund due to
a diminution in the value of its portfolio and/or redemption of its shares
shall not be considered a material adverse change;
(b) The Fund has authority to transfer all of the assets of the
Fund to be conveyed hereunder free and clear of all liens, encumbrances,
security interests, restrictions and limitations whatsoever;
(c) The prospectus as amended and supplemented contained in the
Fund's Registration Statement under the Securities Act of 1933, as
amended, is true, correct and complete, conforms to the requirements of
the Securities Act of 1933 and does not contain any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. The
Registration Statement, as amended, was, as of the date of the filing of
the last Post-Effective Amendment, true, correct and complete, conformed
to the requirements of the Securities Act of 1933 and did not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading;
(d) There is no material contingent liability of the Fund and
no material legal, administrative or other proceedings pending or, to the
knowledge of the Fund, threatened against the Fund, not reflected in such
prospectus;
(e) There are no material contracts outstanding to which the
Fund is a party other than those ordinary in the conduct of its business;
(f) The Fund is a business trust duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts;
(g) All Federal and other tax returns and reports of the Fund
required by law to be filed have been filed, and all Federal and other
taxes shown due on said returns and reports have been paid or provision
shall have been made for the payment thereof and to the best of the
knowledge of the Fund no such return is currently under audit and no
assessment has been asserted with respect to such returns and to the
extent such tax returns with respect to the taxable year of the Fund ended
September 30, 1991 have not been filed, such returns will be filed when
required and the amount of tax shown as due thereon shall be paid when
due; and
(h) The Fund has elected to be treated as a regulated investment
company and, for each fiscal year of its operations, the Fund has met the
requirements of Subchapter M of the Code for qualification and treatment
as a regulated investment company and the Fund intends to meet such
requirements with respect to its current taxable year.
13. Integrity Funds hereby represents and warrants that:
(a) The financial statements of Value Stock as at December 31,
1991 (audited) and June 30, 1992 (unaudited) heretofore furnished to the
Fund, present fairly the financial position, results of operations, and
changes in net assets of Value Stock, as of that date, in conformity with
generally accepted accounting principles applied on a basis consistent
with the preceding year; and that from December 31, 1991 through the date
hereof there have not been, and through the Closing Date there will not
be, any material adverse changes in the business or financial condition
of Value Stock, it being understood that a decrease in the size of Value
Stock due to a diminution in the value of its portfolio and/or redemption
of its shares shall not be considered a material or adverse change;
(b) The prospectus as amended and supplemented contained in
Integrity Fund's Registration Statement under the Securities Act of 1933,
as amended, is true, correct and complete, conforms to the requirements
of the Securities Act of 1933 and does not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. The
Registration Statement, as amended, was, as of the date of the filing of
the last Post-Effective Amendment, true, correct and complete, conformed
to the requirements of the Securities Act of 1933 and did not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading;
(c) There is no material contingent liability of Integrity Funds
and no material, legal, administrative or other proceedings pending or,
to the knowledge of Integrity Funds, threatened against Integrity Funds,
not reflected in such prospectus;
(d) There are no material contracts outstanding to which
Integrity Funds is a party other than those ordinary in the conduct of its
business and there are no outstanding options or rights to acquire its
shares;
(e) Integrity Funds is a validly existing Massachusetts business
trust; has all necessary and material Federal, state and local
authorizations to own all its properties and assets and to carry on its
business as now being conducted; the shares of Value Stock which it issues
to the Fund pursuant to this Agreement will be duly authorized, validly
issued, fully-paid and non-assessable, except as otherwise set forth in
Integrity Funds' Registration Statement; will conform to the description
thereof contained in Integrity Funds' Registration Statement, and will be
duly registered under the Securities Act of 1933 and in the states where
registration is required; and Integrity Funds is duly registered under the
Act and such registration has not been revoked or rescinded and is in full
force and effect;
(f) All Federal and other tax returns and reports of Value Stock
required by law to be filed have been filed, and all Federal and other
taxes shown due on said returns and reports have been paid or provision
shall have been made for the payment thereof and to the best of the
knowledge of Value Stock no such return is currently under audit and no
assessment has been asserted with respect to such returns and to the
extent such tax returns with respect to the taxable year of Value Stock
ended December 31, 1991 have not been filed, such returns will be filed
when required and the amount of tax shown as due thereon shall be paid
when due;
(g) Integrity Funds has elected to be treated as a regulated
investment company and, for each fiscal year of its operations, Integrity
Funds has met the requirements of Subchapter M of the Code for
qualification and treatment as a regulated investment company and
Integrity Funds intends to meet such requirements with respect to its
current taxable year;
(h) Value Stock has no plan or intention (i) to dispose of any
of the assets transferred by the Fund, other than in the ordinary course
of business, or (ii) to redeem or reacquire any of the shares issued by
it in the reorganization other than pursuant to valid requests of
shareholders; and
(i) After consummation of the transactions contemplated by the
Agreement, Value Stock intends to operate its business in a substantially
unchanged manner.
14. Each party hereby represents to the other that no broker or
finder has been employed by it with respect to this Agreement or the
transactions contemplated hereby. Each party also represents and warrants
to the other that the information concerning it in the Proxy Statement and
Prospectus will not as of its date contain any untrue statement of a
material fact or omit to state a fact necessary to make the statements
concerning it therein not misleading and that the financial statements
concerning it will present the information shown fairly in accordance with
generally accepted accounting principles applied on a basis consistent
with the preceding year. Each party also represents and warrants to the
other that this Agreement is valid, binding and enforceable in accordance
with its terms and that the execution, delivery and performance of this
Agreement will not result in any violation of, or be in conflict with, any
provision of any charter, by-laws, contract, agreement, judgment, decree
or order to which it is subject or to which it is a party. Integrity
Funds, on behalf of Value Stock, hereby represents to and covenants with
the Fund that, if the reorganization becomes effective, Integrity Funds
will treat each shareholder of the Fund who received any of Value Stock's
shares as a result of the reorganization as having made the minimum
initial purchase of shares of Value Stock received by such shareholder for
the purpose of making additional investments in shares of such series,
regardless of the value of the shares of Value Stock received.
15. Integrity Funds agrees that it will prepare and file a
Registration Statement under the Securities Act of 1933 on Form N-14 and
which shall contain a preliminary form of proxy statement and prospectus
contemplated by Rule 145 under the Securities Act of 1933. The final form
of such proxy statement and prospectus is referred to in this Agreement
as the "Proxy Statement and Prospectus" and that term shall include any
prospectus to shareholders of Value Stock which is included in the
material mailed to the shareholders of the Fund. Each party agrees that
it will use its best efforts to have such Registration Statement declared
effective and to supply such information concerning itself for inclusion
in the Proxy Statement and Prospectus as may be necessary or desirable in
this connection.
16. The obligations of the parties under this Agreement shall be
subject to the right of either party to abandon and terminate this
Agreement without liability if the other party breaches any material
provision of this Agreement or if any material legal, administrative or
other proceeding shall be instituted or threatened between the date of
this Agreement and the Closing Date (i) seeking to restrain or otherwise
prohibit the transactions contemplated hereby and/or (ii) asserting a
material liability of either party, which proceeding has not been
terminated or the threat thereof removed prior to the Closing Date.
17. This Agreement may be executed in several counterparts, each
of which shall be deemed an original, but all taken together shall
constitute one Agreement. The rights and obligations of each party
pursuant to this Agreement shall not be assignable.
18. All prior or contemporaneous agreements and representations
are merged into this Agreement, which constitutes the entire contract
between the parties hereto. No amendment or modification hereof shall be
of any force and effect unless in writing and signed by the parties and
no party shall be deemed to have waived any provision herein for its
benefit unless it executes a written acknowledgement of such waiver.
19. The Fund understands that the obligations of Integrity Funds
under this Agreement are not binding upon any Trustee or shareholder of
Integrity Funds personally, but bind only Integrity Funds and Integrity
Funds' property. The Fund represents that it has notice of the provisions
of the Declaration of Trust of Integrity Funds disclaiming shareholder and
Trustee liability for acts or obligations of Integrity Funds.
20. Integrity Funds understands that the obligations of the Fund
under this Agreement are not binding upon any Trustee or shareholder of
the Fund personally, but bind only the Fund and the Fund's property.
Integrity Funds represents that it has notice of the provisions of the
Declaration of Trust of the Fund disclaiming shareholder and Trustee
liability for acts or obligations of the Fund.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed and attested by its officers thereunto duly authorized on the
date first set forth above.
Attest: OPPENHEIMER INTEGRITY FUNDS
____________________________ ___________________________________________
Robert G. Zack Jon S. Fossel, President
Attest: OPPENHEIMER BLUE CHIP FUND
____________________________ ____________________________________________
Robert G. Zack Robert G. Galli, Vice President
MERGE/3252
Oppenheimer Value Stock Fund
Exhibit 24(b)(16) to Form N-1A
Performance Data Computation Schedule
The Fund's average annual total returns and total returns are calculated
as described below, on the basis of the Fund's distributions for the past
10 years, which are as follows:
<TABLE>
<CAPTION>
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
<S> <C> <C> <C>
Class A Shares
03/19/87 0.0900 0.0100 11.270
12/31/87 0.3138 0.1777 9.520
06/30/88 0.1800 0.0000 10.460
09/30/88 0.0700 0.0000 10.530
12/30/88 0.0806 0.1894 10.590
03/31/89 0.1000 0.0000 11.060
06/30/89 0.1200 0.0000 11.770
09/29/89 0.0900 0.0000 12.300
12/29/89 0.0993 0.2507 11.990
03/30/90 0.1000 0.0000 11.700
06/29/90 0.1000 0.0000 12.230
09/28/90 0.0900 0.0000 10.600
12/31/90 0.0964 0.1036 10.850
04/03/91 0.0900 0.0000 12.840
06/21/91 0.0800 0.0000 13.040
09/20/91 0.0800 0.0000 13.150
12/20/91 0.0840 0.3110 12.680
03/27/92 0.0800 0.0000 13.510
06/26/92 0.0800 0.0000 13.780
09/25/92 0.0800 0.0000 13.970
12/28/92 0.0820 0.3460 14.220
03/24/93 0.0700 0.0000 14.790
06/25/93 0.0700 0.0000 14.650
09/24/93 0.0700 0.0000 14.910
12/29/93 0.0780 0.7600 14.460
Class B Shares
06/25/93 0.0600 0.0000 14.630
09/24/93 0.0530 0.0000 14.870
12/29/93 0.0530 0.7600 14.400
</TABLE>
1. AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 12/31/93:
The formula for calculating average annual total return is as follows:
1 ERV n
--------------- = n (---) - 1 = average annual total return
number of years P
Where: ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period
P = hypothetical initial investment of $1,000
Class A Shares
Examples, assuming a maximum sales charge of 5.75%:
One Year Five Year Inception
$1,027.03 1 $1,692.45 .2 $1,943.04 .1424
(---------) - 1 = 2.70% (---------) - 1 = 11.10% (---------) - 1 = 9.92%
$1,000 $1,000 $1,000
Examples at NAV:
One Year Five Year Inception
$1,089.69 1 $1,795.71 .2 $2,061.58 .1424
(---------) - 1 = 8.97% (---------) - 1 = 12.42% (---------) - 1 = 10.85%
$1,000 $1,000 $1,000
Class B Shares
Example, assuming a maximum contingent deferred sales charge of
5.00% for the first year:
Inception (05/01/93)
$ 996.34 1.5000
(---------) - 1 = <0.55%>
$1,000
Example at NAV:
Inception (05/01/93)
$1,046.34 1.5000
(---------) - 1 = 7.03%
$1,000
Oppenheimer Value Stock Fund
Page 3
April 28, 1994
2. CUMULATIVE TOTAL RETURNS FOR THE PERIODS ENDED 12/31/93:
The formula for calculating cumulative total return is as follows:
ERV - P
------- = Cumulative Total Return
P
Class A Shares
Examples, assuming a maximum sales charge:
One Year Five Year Inception
$1,027.03 - 1,000 $1,692.45 - 1,000 $1,943.04 - 1,000
----------------------- = 2.70% ----------------------- = 69.25%
----------------------- = 94.30%
$1,000 $1,000 $1,000
Examples at NAV:
One Year Five Year Inception
$1,089.69 - 1,000 $1,795.71 - 1,000 $2,061.58 - 1,000
----------------------- = 8.97% ----------------------- = 79.57%
- ----------------------- = 106.16%
$1,000 $1,000 $1,000
Class B Shares
Inception (05/01/93)(at Maximum Contingent Deferred Sales Charge
of 5.00%)
$ 996.34 - $1,000
-------------------- = <0.37%>
$1,000
Inception (05/01/93)(at NAV)
$1,046.34 - $1,000
-------------------- = 4.63%
$1,000
Oppenheimer Investment Grade Bond Fund
Exhibit 24(b)(16) to Form N-1A
Performance Data Computation Schedule
The Fund's average annual total returns and total returns are calculated
as described below, on the basis of the Fund's distributions for the past
10 years, which are as follows:
<TABLE>
<CAPTION>
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
<S> <C> <C> <C>
Class A Shares
06/30/88 0.2600 0.0000 10.360
09/30/88 0.2400 0.0000 10.370
12/30/88 0.2500 0.0000 10.110
03/31/89 0.2500 0.0000 10.020
06/30/89 0.2400 0.0000 10.450
09/29/89 0.2300 0.0000 10.360
12/29/89 0.2200 0.0000 10.290
01/31/90 0.0800 0.0000 10.120
02/28/90 0.0800 0.0000 9.930
03/30/90 0.0800 0.0000 9.930
04/30/90 0.0700 0.0000 9.840
05/31/90 0.0700 0.0000 10.060
06/29/90 0.0700 0.0000 9.960
07/31/90 0.0750 0.0000 9.900
08/31/90 0.0750 0.0000 9.810
09/28/90 0.0750 0.0000 9.690
10/31/90 0.0700 0.0000 9.790
11/30/90 0.0750 0.0000 9.930
12/31/90 0.0640 0.0000 9.780
01/31/91 0.0650 0.0000 10.030
02/28/91 0.0650 0.0000 9.970
04/03/91 0.0650 0.0000 9.980
05/01/91 0.0650 0.0000 10.040
05/29/91 0.0650 0.0000 10.030
06/26/91 0.0650 0.0000 9.930
07/24/91 0.0620 0.0000 9.980
08/21/91 0.0650 0.0000 10.250
09/18/91 0.0650 0.0000 10.290
10/16/91 0.0600 0.0000 10.370
11/20/91 0.0650 0.0000 10.470
12/18/91 0.0760 0.0000 10.550
01/15/92 0.0600 0.0000 10.670
02/19/92 0.0650 0.0000 10.470
03/18/92 0.0650 0.0000 10.380
04/15/92 0.0610 0.0000 10.530
05/20/92 0.0650 0.0000 10.610
06/17/92 0.0620 0.0000 10.600
07/15/92 0.0600 0.0000 10.800
08/19/92 0.0600 0.0000 10.990
09/16/92 0.0600 0.0000 11.050
10/21/92 0.0600 0.0000 10.830
11/18/92 0.0600 0.0000 10.790
12/16/92 0.0850 0.0000 10.730
01/20/93 0.0500 0.0000 10.790
02/17/93 0.0600 0.0000 10.990
03/17/93 0.0600 0.0000 11.060
04/21/93 0.0600 0.0000 11.160
05/19/93 0.0600 0.0000 11.050
06/16/93 0.0560 0.0000 11.110
07/29/93 0.0810 0.0000 11.180
08/30/93 0.0590 0.0000 11.350
09/30/93 0.0530 0.0000 11.350
10/29/93 0.0565332 0.0000 11.340
11/30/93 0.0574140 0.0000 11.130
12/31/93 0.0538857 0.0000 11.120
Class B Shares
05/19/93 0.0540 0.0000 11.050
06/16/93 0.0490 0.0000 11.100
07/29/93 0.0740 0.0000 11.180
08/30/93 0.0520 0.0000 11.350
09/30/93 0.0460 0.0000 11.340
10/29/93 0.0489813 0.0000 11.330
11/30/93 0.0493279 0.0000 11.120
12/31/93 0.0466107 0.0000 11.110
</TABLE>
1. AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 12/31/93:
The formula for calculating average annual total return is as follows:
1 ERV n
--------------- = n (---) - 1 = average annual total return
number of years P
Where: ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period
P = hypothetical initial investment of $1,000
Class A Shares
Examples, assuming a maximum sales charge of 4.75%:
One Year Five Year Inception
$1,050.64 1 $1,546.93 .2 $1,616.26 .1750
(---------) - 1 = 5.06% (---------) - 1 = 9.12% (---------) - 1 = 8.77%
$1,000 $1,000 $1,000
Examples at NAV:
One Year Five Year Inception
$1,103.04 1 $1,624.07 .2 $1,696.86 .1750
(---------) - 1 = 10.30% (---------) - 1 = 10.18% (---------) - 1 = 9.70%
$1,000 $1,000 $1,000
Class B Shares
Example, assuming a maximum contingent deferred sales charge of
5.00% for the first year:
Inception 05/01/93)
$ 989.07 1.5000
(---------) - 1 = <1.64%>
$1,000
Example at NAV:
Inception 05/01/93)
$1,039.07 1.5000
(---------) - 1 = 5.92%
$1,000
Oppenheimer Investment Grade Bond Fund
Page 4
April 28, 1994
2. CUMULATIVE TOTAL RETURNS FOR THE PERIODS ENDED 12/31/93:
The formula for calculating cumulative total return is as follows:
ERV - P
------- = Cumulative Total Return
P
Class A Shares
Examples, assuming a maximum sales charge:
One Year Five Year Inception
$1,050.64 - 1,000 $1,546.93 - 1,000 $1,616.26 - 1,000
----------------------- = 5.06% ----------------------- = 54.69%
- ----------------------- = 61.26%
$1,000 $1,000 $1,000
Examples at NAV:
One Year Five Year Inception
$1,103.04 - 1,000 $1,624.07 - 1,000 $1,696.86 - 1,000
----------------------- = 10.30% ----------------------- = 62.41%
- ----------------------- = 69.69%
$1,000 $1,000 $1,000
Class B Shares
Inception (05/01/93)(at Maximum Contingent Deferred Sales Charge of
5.00%)
$ 989.07 - $1,000
-------------------- = <1.09%>
$1,000
Inception (05/01/93)(at NAV)
$1,039.07 - $1,000
-------------------- = 3.91%
$1,000
Oppenheimer Investment Grade Bond Fund
Page 5
April 28, 1994
3. STANDARDIZED YIELDS FOR THE 30-DAY PERIOD ENDED 12/31/93:
The Fund's standardized yield is calculated using the following formula
set forth in the SEC rules:
a - b 6
Standardized Yield = 2 {(------- + 1) - 1}
cd or e
The symbols above represent the following factors:
a = Dividends and interest earned during the 30-day period.
b = Expenses accrued for the period (net of any expense
reimbursements).
c = Average daily number of Fund shares outstanding during the
30-day period that were entitled to receive dividends.
d = The Fund's maximum offering price (including sales charge) per
share on the last day of the period, adjusted for undeclared net
investment income.
e = The Fund's net asset value (excluding contingent deferred sales
charge) per share on the last day of the period, adjusted for
undeclared net investment income.
Class A Shares
Example, assuming a maximum sales charge of 4.75%
$680,389.53 - $105,737.47 6
2 {( --------------------------- + 1) - 1} = 6.03%
9,927,856 x $11.67
Class B Shares
Example at NAV:
$ 10,431.40 - $ 2,723.14 6
2 {( --------------------------- + 1) - 1} = 5.52%
152,448 x $11.11
Oppenheimer Investment Grade Bond Fund
Page 6
April 28, 1994
4. DIVIDEND YIELDS FOR THE 30-DAY PERIOD ENDED 12/31/93:
The Fund's dividend yields are calculated using the following
formula:
a x 12
Dividend Yield = ------
b or c
The symbols above represent the following factors:
a = The dividend earned during the period.
b = The Fund's maximum offering price (including sales charge)
per share on the last day of the period.
c = The Fund's Net Asset Value (excluding sales charge)per share
on the last day of the period.
Examples:
Class A Shares
Dividend Yield $.0538857 x 12
at Maximum Offer -------------- = 5.54%
$11.67
Dividend Yield $.0538857 x 12
at Net Asset Value -------------- = 5.82%
$11.12
Class B Shares
Dividend Yield $.0466107 x 12
at Net Asset Value -------------- = 5.03%
$11.11
